Petrol & Katrina Impact Wide Array of Product Costs

Complacency is not recommended for the U.S. consumer this winter according to forecasters who say that a wide range of products from food to auto parts will see rises in retail prices. While food prices have risen over the past decade, the impending costs will be different, as they are expected to be the largest at one time over the past several years and not only due to the cost of delivering goods but because of the overnight escalation of the cost of producing plastic.

And not dissimilar to the blame game which was played from Louisiana to Washington, D.C. in the aftermath of Hurricane Katrina, we now see the corporate sector using Katrina to advantage as well. First, we had the oil companies blaming the price of gas at the pump on the price of a barrel of oil, then blaming Katrina for the shutdown of refinery operations and then on the lack of refineries in order process the imported oil the U.S. was receiving from Europe, as a result of the shutdowns from Hurricanes Katrina and Rita. The U.S. Congress is still in the initial stages of investigating how much of that is palpable.

But following the disaster in the Gulf of Mexico, U.S. consumers will also experience sticker shock beyond the pumps and their monthly heating bills. Unbeknownst to the average consumer is that the majority of plastic resins manufactured by U.S. factories are located along the Gulf Coast. Initially, the factories were shut down during the storms. Secondly, the factories require natural gas to generate the power needed to run the plastics factories. And thirdly, due to the short supplies of the raw materials or resins used in the manufacture of plastic, the three most common types have increased in price between 20 and 30 per cent to date since August 2005, with another projected 8 per cent increase by the end of November 2005, according to Plastics News, a trade publication.

Dow Chemical Co., for example, which runs a plastics factory outside of New Orleans, LA in Hahnville, LA, was forced to cancel 1,000 contracts after Hurricane Katrina, including those with Rubbermaid, Inc. and the Clorox Company. That then translates into myriad products consumed by the average American on a daily basis in which plastic is either a component of its manufacture or plastic containers or wrappings which contain another product such as food items or dry goods. For instance, the price of a gallon of milk has risen approximately 15 cents since Hurricane Katrina because of the plastic bottles in which it is distributed.

And while there is much public discourse about Americans