WASHINGTON—Rubber manufacturers and tire dealers in the Midwest aren't happy with skyrocketing oil and gasoline prices, but they aren't quite in a panic yet.
"We need to determine whether prices are going to stay where they are, or start going down after a while," said a spokesman for retreading equipment and materials supplier Bandag Inc., whose headquarters in Muscatine, Iowa, place it right in the middle of one of the hardest-hit states.
Major tire and rubber product manufacturers, reacting to the rising price of crude oil, announced a massive round of price increases this spring, long before gas prices soared to as high as $2.50 per gallon in the Chicago and Milwaukee areas.
Illinois had the highest average gas price in the nation in June—$1.98 per gallon—according to the American Automobile Association and the Associated Press. The month before, the average per-gallon price in the state was $1.66.
Similar heart-stopping leaps in gas prices between May and June were recorded in such states as Michigan (to $1.96 from $1.50), Wisconsin (to $1.91 from $1.58), Indiana (to $1.77 from $1.47), Minnesota (to $1.75 from $1.51), Iowa (to $1.73 from $1.48) and Ohio (to $1.71 from $1.52).
Though reasons ranging from federal requirements for reformulated gasoline to interruption of service from a Midwestern oil pipeline were advanced for the spike in prices, none of them—even combined—seemed to account for such a precipitous climb.
Indiana alleviated the crunch on its residents by declaring a 60-day moratorium on its gasoline tax, saving Hoosiers seven to 10 cents per gallon. Illinois planned a special session of its legislature to discuss a similar move. President Clinton, however, shied away from suspending the federal gas tax, saying such a move would take needed funds away from highway projects.
Meanwhile, rubber manufacturers and tire dealers in the Midwest are placing their concerns in perspective.
Oil prices have affected the overall raw materials costs at Cooper Tire & Rubber Co., although the company prefers not to discuss how much, a spokesman said.
"There's an overall negative effect, but not that much, and there are things going on within our company that should offset that in the short run," he said.
For Bandag—which raised prices on its retreading materials 3.5 percent on April 1—the biggest issue is how its truck fleet customers will be affected, a spokesman said.
Tire dealers in the Midwest face the question of not only how customers will be affected, but how those customers who haul tires and other goods will affect the dealers.
"The only problem right now seems to be coming from the wholesale side. Delivery expenses have doubled," said Terri Cole, executive director of the Illinois State Tire Dealers & Retreaders Association. Instead of shipping a tire order immediately, "our members are waiting until they get a number of orders from the same area before they deliver."
High gas prices are "a two-fold problem," said John Buettner Sr., executive director of the Indiana Tire Dealers & Retreaders Association.
"It costs more to operate your road service and wholesale delivery, and that certainly has an effect on your bottom line," he said.
But there is an upside to the situation, Mr. Buettner said. "This presents a real opportunity for dealers to make a more conscious effort to alert their customers to maintain proper air pressure, rotate their tires and do other things to save fuel."
Brett Matschke, general manager of Richlonn's Tire & Service Center in Greendale, Wis., said he hasn't seen any effect yet from the higher gasoline prices.
"I can't say we can correlate any decline in business to the higher prices," Mr. Matschke said. "Our feeling, however, is that if this continues, people will be less likely to drive and to buy tires."
Vendors are starting to add surcharges, he said, but Richlonn's hasn't been much affected by this because its business is strictly retail.