Your example of the rise in polyethylene resin prices is fair comment imo.
However, wouldn't you agree that plastic resin is not wholly reflective of the wide range of goods and services in the economy?.... it is a direct by-product of oil and therefore very sensitive to the oil price movements...
Moreover though, plastic is at the lower end of the value added chain, and as such, it is still at the manufacturing input stage of production. It is no surprise therefore that a manufacturer specialising in plastics (oil being the major indirect input to plastic production) may have to pass these costs on to the buyer to stay in business. This would put some amount of pressure on 'Wholesale' or 'Producer' prices (PPI) but not consumer price CPI figures. More about that in a second.
BUT the decision to pass on costs very much depends upon the competitive structure at this plastics stage of production, and the rational decisions that the plastics business makes...it depends mostly on competitive conditions within the plastics market. The business may decide to keep plastic prices at the same level, and therefore not lose market share, if they believe the oil price rise is only temporary. (I take it from you that plastics manufacturers operate on tight margins, presumably due to heavy competition.) Remember also that "price fixing" across horizontal industry players in a market (including plastics) is illegal under the Trade Practices Act...and similar provisions in the EU and U.S.
Most importantly though, we are a VERY very long way from the CONSUMER at the plastics stage. Down the line, as more value is added to the plastic, and as we get closer to the end result of a consumer good or service, a massive array of OTHER inputs is added to the original plastic. Each of these other inputs has its own market structure, generally with lots of competition. So, the original price effect caused by the increase in plastic is diluted massively, and is perhaps negligible or non-existant by the time it hits the consumer as an end-product.
For example, could you imagine Ford or Holden raising their small car prices because of a rise in the price of plastic, this plastic used to make certain interior parts or trim etc? It obviously depends primarliy on the capacitiy of their compeitiors. Would they take their chances against the Asian companies, who possess seemlingly endless capacity to lower prices and still remain in business (due to labor structures etc)? I seriously doubt it.
Would a manufacturer of toys in the US, or Australia, (are their any?-Mattel maybe) be game to raise prices because the costs of plastics went up, or would they know in advance that they would be absolutley creamed by the Chinese competition who has more leverage? Wouldn't the West's toy manufacturer just try to ride the bad times out, by running at a loss or reduced profit until the oil price (plastics) conditions subside?
Here is a link to an excellent article which explains (in theoretical and quantitative terms) why 'big' oil prices do not now mean 'big' inflation in Western economies. It talks about roughly a 10% increase in oil prices translating to roughly a .02% to .08% increase in CPI accross US and EU
Link is: http://econ.ucsc.edu/faculty/chinn/pubs/Presage.pdf.
