From the New York Times.…

Companies that make hard goods using raw materials derived from oil, like tires, toiletries, plastic packaging and computer screens, are watching their costs skyrocket, and they find themselves forced into unpleasant choices: Should they raise prices, shift to less costly procedures, cut workers, or all three?

The Goodyear Tire and Rubber Company is trying to adapt. Its raw material of choice now is natural rubber rather than synthetic rubber, made from oil. To sustain profits, it is making more high-end tires for consumers willing to pay upwards of $100 to replace each tire on their cars.

These steps have not been enough, however, particularly now that the cost of natural rubber is also rising sharply, along with that of many other commodities. So Goodyear has raised the prices of its tires by 15 percent in just four months.

The article goes on to talk about how other companies are dealing with the high oil prices.

From CNN….

“It’s an epidemic, gigantic problem,” Reed said. “In Kern County alone, we’re getting reports of five to seven diesel thefts from farms a week. It’s happening in other parts of the San Joaquin Valley, too.”

The crooks work around the clock, searching during the daytime for irrigation pumps run by diesel engines and supply tanks filled with diesel or gasoline, police and farmers say. They return at night, with their headlights off, to steal hundreds of gallons of fuel at a time.

What are the thieves doing with the stolen diesel?

Reed suspects that they’re selling the fuel to truckers who’ve been hit hard by skyrocketing prices. With the national average of regular unleaded gasoline at a record high of about $4.00 a gallon and more than $4.75 per gallon for diesel, according to AAA, Reed says it makes it even harder for them resist the temptation of cheap fuel.

“It’s going to cost him $500 to fill up, and he can fill up [on stolen diesel] for $200,” Reed said. “What’s he going to do?”

Belluomini’s operation outside the farming town of Arvin, California, got hit hard recently; he estimates that thieves took more than 900 gallons of fuel from several sites, valued at more than $4,000.

From Yahoo News….

Oil prices shot up more than $11 to a new record above $139 Friday after Morgan Stanley predicted prices would hit $150 by the Fourth of July. The unprecedented jump is all but certain to drive gas prices well past the $4 mark in the coming weeks.

Oil’s meteoric surge, which pushed prices more than 8 percent higher in a single day, added to a huge increase Thursday to cap oil’s biggest two-day gain in the history of the New York Mercantile Exchange. The burst higher — which also came on rising Middle East tensions — also raised the prospect of accelerating inflation by adding to already strained transportation costs.

That gloomy outlook sent stocks tumbling, taking the Dow Jones industrials down more than 300 points.

Brad Setser says…….

Call me surprised.

If you had asked me two years ago if oil could come close to $140 amid a US slowdown in the absence of a major interruption in supply, I would have hedged a bit, but ultimately said no.

From Time Magazine….

For a while it looked like a boneheaded move. At the end of 1998, the price of oil fell below $10 per bbl. Regular gas sold for 90¢ a gal. While Internet billionaires were being minted to the right and left of him, Rainwater was getting poorer by the day.

You can guess the rest of the story. The dotcoms imploded; the price of oil climbed, climbed and climbed some more–and Rainwater’s energy bet came to look like one of the better investment calls of our time. It has netted him about $2 billion, vaulting him from the mid-200s on Forbes magazine’s 1999 list of the 400 richest Americans to No. 91 last summer (with $3.5 billion overall).

So guess what Rainwater did a few weeks ago, right after oil prices topped $129 per bbl. for the first time? “I sold my Chevron,” he says. “I sold my ConocoPhillips. I sold my Statoil. I sold my ENSCO. I sold my Pioneer Natural Resources. I sold everything.”

This news, disclosed here for the first time, is a big deal. Lots of Wall Streeters–loudest among them the hedge-fund legend George Soros–have been warning lately that speculation has inflated oil prices into a soon-to-pop bubble. But talk is cheap–this is something more. One of the biggest oil winners of the past decade has decided to get out.

Econbrowser has a chart showing how much cheaper oil if you buy it in euros. (h/t Naked Capitalism)

mighty This from PC world……

Dell was found guilty on Tuesday of fraud, false advertising, deceptive business practices and abusive debt collection practices in a case brought by the New York attorney general.

The Albany County Supreme Court found that Dell deprived customers of technical support that they bought or were eligible for under warranty in several ways, including by requiring people to wait for very long times on the phone, repeatedly transferring their calls and frequently disconnecting their calls.

Dell also often failed to provide onsite repairs for customers who bought contracts for such support and often blamed software when hardware was actually the problem, the court found. The company also sometimes refused to offer support when a support contract ended, even though the user had first complained about a problem before the end of the contract. Subscribers to a “next-day” repair service sometimes waited as long as a year for support, the court found.

Dell use to have a reputation for good support.

Sometimes the numbers being thrown around are so large you sit up and pay attention no matter how jaded you have become. From the Financial Times…..

Accounting changes could force US banks to take thousands of billions of dollars back on to their balance sheets in the coming months in a move that is likely to curb further their lending and could push them into new capital raisings, analysts have warned.

Analysts at Citigroup said a planned tightening of the rules regarding off-balance sheet vehicles would force banks to reconsider arrangements and could result in up to $5,000bn of assets coming back on to the books.

h/t Market Movers

Wall Street Journal has a story from a reporter who accompanied officials from the FDIC when they went to shut down a bank. The article is short on information, but the subject is so important that I recommend reading it anyway. A bank near you is going to fail soon, and it is worth knowing how the system operates. Sometimes you can learn things even from fluff articles. Take this qoute from the article for example….

It isn’t easy for 75 federal officials and contractors to slip into a small town undetected and liquidate an 89-year-old bank without anyone knowing. But that’s what just happened in this old railroad town, population 3,200. It’s a scene that’s likely to repeat itself across the country as banks struggle through a painful credit cycle, overwhelmed by troubled mortgages and soured construction loans.

First Integrity, which had two branches and $55 million in assets, was the fourth FDIC-insured bank to fail this year.

Now think about this. If it takes 75 people to handle the shut down of one teeny bank, how is the FDIC going to handle the all bank failures coming down the pike?

To be fair, the FDIC is aware of this problem and they are trying to gear up. Still, you have to wonder if they will have enough people.

h/t Calculated Risk

A noble prize for a useless theory is a commonplace occurrence in economics field. This rant laments that fact.

From Survival Blog….

I have been selling tuna for about 20 years and over the last two years, have seen the raw material prices double. Normally, prices go up and then back down, as the catch decreases and then increases. However, since there are really no controls on the amount of tuna that are caught, I have been concerned about over fishing, especially with skipjack as it is the every day item that supermarkets sell as chunk light tuna. Given that the frozen fish price has increased from about $1,000 per metric ton to just under $2,000 per metric ton, I think that we may
have hit the point where demand will outpace a diminishing supply. I expect retail prices to continue increasing.

Read the whole post

This week’s essay is Understanding Crude Oil Prices by James D. Hamilton. Don’t be afraid to stretch your brain and don’t be afraid of the math. You need the mental exercise.

Calculated Risk has a chart comparing the year over year change in miles driven vs. the price of gas. For good measure he has marked out the various recessions. Well worth a look.