UpdateCrude surge alarms US manufacturers

(Updates with additional comments from Cox)

HOUSTON (ICIS news)--US manufacturing could take a hit from rising oil prices, a spokesman for a leading industrial trade group said on Wednesday.

"We care about the price of oil," said Hank Cox, spokesman for the National Association of Manufacturers, a US trade group. "Everything that's made goes by truck eventually."

Manufacturers are also concerned about the overall US economy after oil hit the psychologically important $100/bbl level for the first time on Wednesday -- the same day as the Institute for Supply Management (ISM) said US manufacturing activity began to shrink in December due to a moribund housing market.

As the US dollar has weakened over the past year, US manufacturers have enjoyed a surge in exports but not enough to offset the downturn in house construction, Cox said.

"That's the real big weak spot in the economy," he said.

Another effect of higher oil on manufacturing is that US consumers could be forced to cut back on buying goods if fuel prices continue to rise, Cox said.

Higher oil prices could add to pressure on US lawmakers to allow drilling in prohibited parts of the country, Cox said.

Allowing production in the Outer Continental Shelf (OCS) and in the Arctic National Wildlife Refuge (ANWR) would loosen domestic oil supplies and bring prices down, he said. Drilling has been banned in those areas under a Congressional moratorium for over 26 years.

"Whether or not Congress will get off its duff and do something about it is anyone's guess," said Cox. "They can't get it through their heads."

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