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Price Increases

World economies hit home. Again.



Crude oil is refined into ethane, propane and other petrochemical products (including gasoline). Such plastic manufacturers as BASF Chemical Co. (Ludwigshafen, Germany) process the ethane and propane into ethylene and propylene.

Then, adding catalysts, they place the compound into a reactor that produces powdered polymer, which, with additives, is blended, melted and formed into the pellets that plastic-product makers, using extrusion, injection, blow or vacuum molding, form into useable goods, such as the small, orange-colored kangaroo that sits on my home desk. Wind it up, and it performs back flips.

In their online teacher’s guide, writers David and Sheila Kopaska-Merkel, along with Brian J. O’Neill, tell third- through seventh-grade students about petroleum products — plastic, for example, or vinyl or lipstick. In their guide, the writers ask students to ponder the value and need of petroleum. They want children to imagine a world without petroleum products, such as DVD disks. “Would you like to live in such a world?” they asked. “And what would you have to give up?”

Good questions. Probably because they didn’t want to worry the kids, the writers didn’t mention the social and economic impact of a limited petroleum supply, or its evil twin, global warming. Ignorance or inaction, either — or both — could, some say, cause a worldwide, economic depression comparable to the 1929 Great Depression. It continued for 10 years, and only the massive, weapons-building undertakings of World War II regenerated global economies., in an October 30 brief, quotes former World Bank economist Nicholas Stern as saying climate change (global warming), if left unchecked, will devastate the global economy on a scale of two world wars and the 1930s’ depression. The U.K. government commissioned Stern to prepare an “Economics of Climate Change” report. CNN quotes U.K. Prime Minister Tony Blair’s response: “Unless we act now, the consequences, disastrous as they are, will be irreversible.”

Stern says the benefits of coordinated, worldwide action will outweigh costs.


Although experts still debate the causes, greenhouse gases (those that trap heat within our atmosphere, such as methane, nitrous oxide and chlorofluorocarbons) have been steadily increasing in the earth’s atmosphere. CO2 concentrations have increased approximately 20% over the past 45 years.

Plastic everything

With few exceptions, plastic is a petroleum-based product. They may take different forms and serve different purposes, but plastics — including signmaking vinyl, the zipper on your windbreaker, your Toyota’s dashboard and the more than one billion China-made toys McDonald’s® annually hands out to children — are made from petroleum derivatives.

This may be one reason why China is financing homes in Venezuela. China is seeking outside oil sources because of its increased, internal demands and, on this track, has been romancing Venezuela.

We’re buying some of this oil back, by the way, in the form of McDonald’s toys. I won’t get into Wal-Mart’s plastic-burdened shelves and the close to $20 billion it imports from China. Not today, anyway.


The Financial Times’ August 23 edition reported that China has agreed to help build 20,000 homes in oil-rich Venezuela. It will pay for three-quarters of the $1.2 billion project. The newspaper says Venezuelan President Hugo Chavez made the deal while visiting China.

How much oil?

A China Institute newsletter says PetroChina imported 692,400 metric tons of Venezuelan oil during the first four months of 2006. One metric ton is 358.29 U.S. gallons. Therefore, 692,400 3 358.29 = 24,807,999 gallons, divided by 42 (one barrel holds 42 U.S. gallons), equals 5,906,666 barrels purchased over four months, roughly 49,000 barrels a day.

The United States imports slightly twice China’s present purchase from Venezuela. The U.S. Energy Information Administration says the top sources of U.S. crude oil imports for August were Canada (1.850 million barrels per day), Mexico (1.652 million barrels per day), Saudi Arabia (1.477 million barrels per day) and Venezuela (1.151 million barrels per day).

Chavez, a friend to Cuba’s Fidel Castro, likes to stir things up. One year ago, the Arab news agency Aljazeera reported Chavez saying that his country is preparing for a possible U.S. invasion.

“If the United States tried to attack Venezuela by a direct invasion, forget the oil,” Chavez said.


Chavez has joined with Iran’s President Mahmoud Ahmadinejad

in accusing the United States of “domination, exploitation and pillage of peoples of the world.”

Chavez visited Ahmadinejad in Iran on July 30; it was his fifth visit. You might also remember that Chavez, while speaking at the United Nations on September 20, called the United States’ president “the devil.”

On July 28, India’s primary newspaper, The Hindu, reported Chavez had signed a $3 billion arms deal with Russia. The deal includes 24 Russian Sukhoi-30 jets and 53 helicopters. Further, Chavez is negotiating to buy a license for the manufacture of Kalashnikov rifles in Venezuela. This is in addition to 100,000 Kalashnikovs he’s already purchased from the Russia government.

Dwindling oil reserves

Dr. David L. Goodstein, Ph.D., vice provost and professor of physics and applied physics at Caltech, has served on and chaired numerous scientific and academic panels, including the National Advisory Committee to the Mathematical and Physical Sciences. He is a founding member of the Board of Directors of the California Council on Science and Technology; and the Directorate of the National Science Foundation. Recently, in addition to teaching, research and other issues, Dr. Goodstein wrote The End of the Age of Oil, which indicates that any natural-resource supply — oil, in this case — invariably rises from zero to a maximum point, and then falls forever. One premise is that economists, when saying the supply-and-demand factor will control supplies, forget that dwindling supplies continue to dwindle.

Goodstein says accepting the economists’ solution, and letting the marketplace govern (instead of fixing the problem), will cause the world to start running out of fossil fuels by the end of this century. He says natural gas, coal, hydrogen fuels and wind-generated electricity aren’t a complete answer. Natural-gas supplies are also dwindling; coal’s exhaust causes environmental problems (it contains mercury, arsenic and sulfur) and adds to the global-warming mix; hydrogen-fuel production wastes energy, and the wind doesn’t blow everywhere.

Higher prices

Most analysts say present, low fuel prices have more to do with the pre-election than the economy. Some claim the oil companies purposely relaxed the price, to comfort voters.

The Consumer Price Index (CPI) tells another story. It measures the average price changes paid by urban consumers, over time, for a market basket of consumer goods and services. It’s mainly used as an economic indicator. In September 1996, the CPI was 72.1; for 2006, the September rating was 183.8, up 6.6 points since January and 57.6 from the previous January.

Jim Beach, of Beach Marketing and Advertising Services (Sun Prairie, WI), has written me saying, although the CPI shows consistent increases in the 3% range since 2000, refined petroleum-product prices are up approximately eight times more — a 143% increase from August 2000 to August 2006.

Jim says the cost of signmaking materials is affected by growing worldwide economies. He points to China’s growth and its accompanying demand for raw materials. Add this to global political tensions, he said, and see that sign and graphic-arts suppliers — and their customers — are facing unreliable material sources along with higher costs.



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