The long-dreaded impact of high oil and gas prices on the U.S. economy is starting to show in a number of ways. New cracks have appeared in energy demand and Congress is rattling its legislative sword. The president is asking people to drive less and conserve more. Caulk is the hot new product. SUV and home sales are slowing; consumer spending is wobbling; holiday sales expectations have been trimmed. Manufacturers are starting to react. Proctor & Gamble said recently it is trying to reduce its use of crude oil as an ingredient for making surfactants-the chemicals that make laundry soap and shampoo actually clean what they touch-by using more palm oil instead. CF Industries said last month that among other tactics, including hedging natural gas prices, it will reduce the operating rate at its nitrogen fertilizer complex in Donaldsonville, Louisiana, by 50% through the end of the year, to save on its gas bill. "The effect of sharply higher energy prices and fertilizer costs on farmers' plans for next spring cannot be determined at this time," chief executive Stephen R. Wilson warned. But David Wyss, the Standard & Poor's chief economist, thinks the U.S. economy can handle the price shock better now than 35 years ago. "Americans spend a much smaller share of their income on energy than in the past," he said in an October report. "Per capita, the average American uses about as much energy in Btus as in 1970, but real incomes have more than doubled since then." Maybe so, but you cannot mollify homeowners who fear their heating bills will double this winter. And there is a greater fear-that spot shortages of electricity, natural gas or fuel oil could occur. For more on this, see the November issue of Oil and Gas Investor. For a subscription, call 713-993-9320, ext. 126.
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