Oil Leaking Into Economy Consumer prices inflating By JUDITH SCHOOLMAN Daily News Business Writer

Vaulting oil prices could result in an extra chill this winter  not only in the pocketbook, but in the American economy, as well.

Crude oil prices jumped another 4% yesterday to $32.40 per 55-gallon barrel. With prices at such historic levels and the amount of oil in storage, known as reserves, at 24-year lows, rising prices will be passed on to consumers.

This coming winter, for example, home heating fuel could top last winter's high of $1.91 a gallon, experts said.

While the trickle-down effect hasn't yet been seen in the prices of many goods such as plastics, clothing or food, economists said higher energy costs could eventually land on the consumer.

Then, inflation could take root  and Alan Greenspan's Federal Reserve might seriously consider raising interest rates again.

"We're whistling past a graveyard to think the persistent rise in energy won't have an impact on the economy," said William Sullivan, market economist at Morgan Stanley Dean Witter.

Thanks to rises in energy costs, the consumer price index, the government statistic that measures what Americans pay for goods and services, rose about 3.75% this past June from June 1999.

Two years ago, Sullivan said, the consumer price index rose about 1.75% year-over-year.

"Indeed, energy has had some impact that we can't ignore," Sullivan said.

Importantly, an increase in the CPI could put inflationary pressure on Social Security benefits, wage contracts and rents.

Fuel-related pass-alongs have already been seen in airline fares, Sullivan said. "It would increase Domino's cost of delivering a pizza," he added.

Meanwhile, a debate is raging over ways to lower oil costs to American consumers.

Sen. Charles Schumer advocates releasing part of Strategic Petroleum Reserves, which the government has put aside in case of a national emergency. This would put more oil into the market, increasing supply and decreasing the price.

"Increasing energy costs could create real problems; it's not simply what you pay at the pump or for home heating oil," Schumer told the Daily News yesterday.

Energy Secretary Bill Richardson has said repeatedly that the release of the reserves would not be used to manipulate oil prices, a department spokesman said yesterday.

President Clinton said yesterday he wanted to push the Arab states and other members of the OPEC oil cartel to increase production so oil prices could fall.

Clinton said oil prices should be in the low- to mid-$20 a barrel range and warned that, if prices get too high, "they will cause recession in other countries."

http://www.nydailynews.com/2000-08-24/News_and_Views/Media_and_Business/a-77591.asp

-- Martin Thompson (mthom1927@aol.com), August 24, 2000

Answers

55 gallons in a steel drum. 42 gallons per barrel of oil. Who wants to be a million question.

-- David Williams (DAVIDWILL@prodigy.net), August 24, 2000.

Why can't the price of oil rise, if everything else has. A whopper 20 years ago was less than a dollar, and petrol has remained about the same. Aren't whoppers a commodidty too?

Look at grain prices, the farmers are going through the same squeeze too.

Wheat and corn <<$3 a bushel ~60#, and a box of cereal is ~$4 for 14 ounces that's about $250 a bushel and we know that their is not $247 worth of "processing". While the costs of advertising and shipping and processing is a valid add on, this is a bit steep. A bo of Ronzoni pasta cost ~$1 per pound this is closer to an extreme but reasonable markup.

Just my 2"

-- (perry@ofuzzy1.com), August 25, 2000.