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High Oil Prices Have Broad Impact on Prices of Many Consumer Goods

The latest data on consumer spending shows the U.S. economy continues to expand at a healthy pace. But some economists fear oil prices, which hit $74 dollars a barrel Tuesday, could slow economic growth by reducing disposable income. As VOA's Mil Arcega reports, high-energy prices have a ripple effect on many consumer products.

It's not just gasoline prices that are going up. Car tires, made from oil-based, synthetic rubber, will soon cost more. So will road repairs. Asphalt, obtained by processing crude oil, costs nearly 50 percent more than it did last year.

Daniel Massey an energy analyst at Argus Media, which publishes a weekly newsletter, says that could slow road-building projects dramatically. "Municipalities and other state governments have to kill road projects when the price of asphalt goes up because their budgets are fixed once a year."

And it's already costing more to fly. Airline ticket prices are up an average of nine percent this year. American Airlines, says every one-cent increase in the price of fuel, adds $29 million in costs per year.

Flight operations manager Steve Chealander, says the company has no choice but to pass higher costs on to consumers. "Our plan is to operate the airline at those prices and to operate at a profit."

In order to turn a profit, manufacturers have to charge more for nearly everything - from plastic milk containers to lawn fertilizer. Retired resource analyst Tom Whipple says food is especially vulnerable to price hikes because it takes so much petroleum-based energy just to produce one calorie of food energy.

In a cost breakdown, Mr. Whipple says, "There are 10 calories of oil in every calorie of food that you eat, all the way from tractors, to the fertilizers to the trucks, the shipping, the trucks in the interstate, the supermarket refrigeration, that sort of thing."

U.S. Energy Secretary Samuel Bodman says high oil prices have created a crisis for some American families. "There are many families today in this country that can't afford today's prices, let alone prices that might be created in the future."

The range of products affected by higher oil prices is surprising: For young families, there are disposable diapers, which use petrochemicals to improve absorbency. The cost of manufacturing children's crayons, made from paraffin wax, is up 10 percent this year. And the price of nylon carpets, another petrochemical product, is up about 30 percent from last year.