Paper or pricey plastic?

WASHINGTON (Reuters) - You know that flimsy plastic bag the convenience store clerk put your toothpaste in?

The price of those bags, though still cheaper than paper ones, is rising fast because of higher natural gas and oil prices. And the same goes for plastic water bottles, takeout containers, the case around your computer, and car parts.

Let's start with that flyaway plastic bag -- which has gotten flimsier as packaging makers of all stripes cut costs.

That bag is made from high density polyethylene, which cost a little over $70 per pound in early 2007 and now costs $100, according to figures supplied by Integrated Design Engineering Systems (IDES), which follows the plastics industry.

"I think it's pretty safe to say it's the highest ever. I think you'll see some fluctuations but long term I don't think it can go down," IDES President Mike Kmetz said.

John Kalkowski of trade publication Packaging Digest said plastic bag makers of all stripes were struggling. "Most packagers have not been able to pass along most of the cost increases that they've incurred," he said.

Big companies declined to say how much they paid for plastic bags but fruit merchant David Hochheimer of Black Rock Orchard in Maryland was more forthcoming.

A year ago, Hochheimer paid $23 to $25 for a case of 800 to 1,000 grocery-style plastic bags. Now, a case costs him $27.95 -- a double-digit-percentage increase.

The price may go up further since Dow Chemical Co said it would raise the price of all its products as of June 1 by up to 20 percent.

"Our first-quarter feedstock and energy bill leapt a staggering 42 percent year over year, and that trajectory has continued, with the cost of oil and natural gas climbing ever higher," Dow CEO Andrew Liveris said in a statement.

Dow is not alone. "I just saw this morning several price increase announcements," said Ben Miyares of Pack Expo, a website that specializes in packaging.

THINNER, CONCENTRATED, LESS AIR

But even before energy prices began their latest rise, cost-conscious companies were taking a hard look at packaging.

Bottled-water makers such as Arrowhead and Poland Spring, a Nestle unit, redesigned bottles to use less plastic, while other companies put, say, less water in their liquid laundry detergent or less air in potato chip bags.

"You may have noticed that liquid detergent bottles are getting smaller," Miyares said. "Now a thimble full of detergent will give you the same washing power that half a cup used to."

"The head space in a bag is being reduced. Now that's something that was debated for many years ... Were the snack food people cheating the customers by having so much head space? But the new issue is how can we cut the packaging?" he said. "Over the billions of bags of salty snacks that are sold, that (less air in the bag) amounts to pretty big money."

Susan Selke of Michigan State University's School of Packaging said she expected more changes in packaging to use less plastic, and also more plastic made from sugar cane and other renewable resources, rather than natural gas and oil.

"Energy prices are going up dramatically and that means that everything costs more," she added. "I don't see that affecting the competitiveness of plastic in the marketplace."

In addition to cost, the plastic bag already had critics in the environmental movement who point out that the bags are made from a non-renewable resource and few are ever recycled.

China has prohibited stores from giving customers free plastic bags. San Francisco has banned them, and Boston is considering a similar move. Whole Foods Market Inc stores eliminated them this year.

But switching to paper will not help people like Hochheimer, who sells apples, pears and other fruit at farmers markets. The price of paper bags doubled from 3 cents a piece to 6 cents in a year.

"I spend more for bags than I do for (agricultural) chemicals," Hochheimer said. "For me, that's an unbelievable expense."

(Editing by Braden Reddall)