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Oil’s Relentless Climb Toward $100 Wreaks Havoc on Company Profits

From freight carriers to toymakers, businesses are rushing to pass along the added expense to their customers.
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Photographer: Maggie Shannon for Bloomberg Businessweek; Prop stylist: Cody Rogers

Isaac Larian, founder of MGA Entertainment Inc., thought he’d withstood the worst of last year’s tsunami of costs from supply chain snags and labor shortages. But now the maker of Bratz and L.O.L. Surprise! dolls and Little Tikes toys is bracing for a second wave of profit destruction: $100-a-barrel oil. “It’s just a disaster,” says Larian, who like many toymakers has some material costs closely tied to the price of oil and natural gas. “There’s not much you can do.”

Analysts see crude soon topping the century mark, and prices could even spike to $150 if Russia-Ukraine tensions escalate to create a supply shock, JPMorgan Chase & Co. economists Joseph Lupton and Bruce Kasman said in a report. The name of the inflation game for companies is to pass along such cost increases as much and as quickly as possible. But since the pandemic hit, that hasn’t been easy. A labor shortage has pushed up wages, and a deluge of imported merchandise has clogged the supply chain, driving up freight costs and creating a scarcity of goods that’s powering pricing. Now companies and consumers are seeing more cost pressure as oil and natural gas climb to their loftiest levels since 2014, and all indicators point toward still higher energy prices ahead.