Chemicals made from oil are used by companies to manufacture many products consumers rely on every day, such as plastic bottles, aspirin, lipstick and deodorant.
“It’s used in pretty much everything,” Wachovia economist Jason Schenker says. “I cannot look at my desk and see things that are not petroleum-based.”
Even though oil-based products are so pervasive, the direct impact of the rise in the cost of making such goods on consumers has been ? and likely will continue to be ? minimal. That’s because manufacturers, faced with strong global competition, are unable to pass along all of the added costs to customers. That means prices for most oil-derived products will likely barely budge as a result of higher energy costs.
But the impact on manufacturers and other companies that use oil-based ingredients could be significant, causing a ripple effect throughout the economy. As firms are faced with rising prices and see their margins cut, they may have to cut back on production, reduce pay increases or maybe even cut jobs or shut down.