Price Increases Impact Kentucky Retailers

Owensboro, KY, April 25--Certainly, it's no secret that the price of crude oil plays havoc with the cost of gasoline and other fuels, such as natural gas, according to the Owensboro Messenger-Inquirer. And, of course, rising fuel costs drive up the price of transporting goods and providing services. But the price of crude oil has jolted an industry few people may associate with petroleum. Since January 2004, the wholesale price of carpet has jumped nine times. The latest increase went into effect last week. With current volatility in the global crude oil market, flooring experts expect another couple of price jumps this year. All this from an industry that has seen years pass without a wholesale price increase. Plus, the industry's retailers got spoiled because some past price hikes were rolled back because of intense competition among mills. At least one local store owner fears those days are long gone. Mark Hayden, owner of Discount Floors Carpet One in Owensboro, believes higher prices are here to stay. Hayden has been involved in his family's flooring business since he was a first-grader. He's 53 now. And he's never seen anything like the nine increases in the past year or so. "It's a shock to those of us in the flooring business," he said. Carpet is made of three major fibers: nylon, polyester and olefin. A base product in making synthetic fibers is benzene, also known as petroleum ether. The use of petroleum-based products to make carpet fiber is being blamed for recent price increases. Margie Baylis of Owensboro searched through carpet samples last week at Carpets Unlimited. For more than five years, she's been remodeling her home. First, Baylis updated the basement with new carpet. Then, she moved on to the kitchen, nursery and bathroom. Now, she's hunting for new dining room flooring. Like the majority of consumers, Baylis never knew crude oil was used to manufacture carpet fiber. While pricing flooring recently, she realized prices had jumped since she started her home improvement project. "(Carpet has) gone up a little bit, but the price of everything has gone up," Baylis said. According to the Washington, D.C.-based American Petroleum Institute, crude oil sold for about $33 a barrel at the beginning of 2004. By comparison, it hit an all-time high of $58 earlier this month. It's a global market driven by supply and demand, said Jane Van Ryan, senior communications manager at API. The price of petroleum creates a ripple effect for many industries. "It really is very pervasive throughout our economy," Van Ryan said of crude oil. Jason Crandall, president of Carpets Unlimited in Owensboro, said some wholesale prices have jumped by as much as 50 percent in the past year or so, depending on the product. "Petroleum is involved in the whole process," Crandall said. "It's going to affect everything." Carpets Unlimited caters to some large homebuilders and property management firms. They've been stunned by the price jumps, Crandall said. Homebuilders, in particular, were used to hikes in the price of lumber, but not carpet. All of the sudden increases make it hard for Carpets Unlimited and its large customers who depend on quotes made months in advance of a job. For a while, the store absorbed the higher costs for some of its bigger customers. "But it got so bad we had to pass along that increase," Crandall said. As the latest price hike took effect, he said the company would adjust some prices and take part of the hit. So far, higher prices haven't hurt local sales, Crandall and Hayden said. "Carpet is still an exceptional value when compared to how much cars and other products have gone up over the years," Hayden said. The industry continues to study ways to make carpet fibers without petroleum, said Mark Hobson, a Mohawk representative. One option might be corn sugar.

Related Topics:Mohawk Industries, RD Weis, Carpet One

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