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DOE, published in July 1981. The prefatory overview to the DOE
report, however, cautioned about "the tremendous uncertainties
underlying energy projections" and warned "that [the] projections
[in the report] do not constitute any sort of blueprint for the
future." Reflective of such uncertainties, the April 1980 Modern
Plastics article contemplated resin price hikes, while the May
1981 article predicted a leveling of prices, market disruptions,
and an industrywide shakeout.
In contrast to petitioner's testimony, respondent's expert
Grossman explained that the price of plastics materials is not
directly proportional to the price of oil. In his report,
Grossman stated that less than 10 percent of crude oil is
utilized for making plastics materials and that studies have
shown that "a 300% increase in crude oil prices results in only a
30 to 40% increase in the cost of plastics products." An even
greater disparity was reported in the May 1981 article from
Modern Plastics, which stated: "A rule-of thumb unproven by
cost-accounting but apparent from price history is that with
every $1/barrel hike for Saudi marker crude, the per-pound price
of ethylene increases by about half a cent." (Emphasis added.)
Indeed, petitioner recalled that during the latter part of 1981
and for some months thereafter, while the price of crude oil
rose, the price of low density polyethylene actually decreased.
Petitioners' reliance on Krause v. Commissioner, 99 T.C. 132
(1992), affd. sub nom. Hildebrand v. Commissioner, 28 F.3d 1024
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