Iran war could make petroleum products from clothes to crayons more costly
Like many soft toys, the creatures developed by a manufacturer in Fort Lauderdale, Florida, are made of polyester and acrylic, synthetic fibers derived from petroleum. Three weeks after the war began, suppliers in China reported to Aleni Brands that it was costing them 10% to 15% more to get the supplies, CEO Ricardo Venegas said.
“I think this shows how much oil has penetrated our system, and we can’t escape it,” said Venegas, who founded Aleni Brands last year and is in the process of adding product lines. “Who would have thought that the price of a toy would have a direct correlation to oil?”
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It’s not just toys. Petrochemicals derived from oil and natural gas are used to make more than 6,000 consumer products, according to the U.S. Department Energy. Computer keyboards, lipstick, tennis rackets, pajamas, soft lenses, detergent, chewing gum, shoes, crayons, shaving cream, pillows, aspirin, dentures, tapes, umbrellas and nylon guitar strings are just a few of them.
So far, the most tangible and immediate impact of the war for many people outside the conflict zone has been rising gasoline prices. Travelers are also seeing higher airfares and fares as airlines respond to rising jet fuel costs. Consumers may find themselves paying more for groceries, furniture, or countless other goods transported by diesel-powered trucks.
But crude oil is not only refined into fuel. It breaks down into chemicals, waxes, oils, and other mixtures that appear in a wide variety of everyday items, including many made of plastic and rubber. Petroleum derivatives are also used in many packages. Higher production costs could also make things more expensive for shoppers, with global oil supply disruptions now in their eighth week, according to trade groups and some companies. Venegas, a 30-year veteran of the toy industry, said he will absorb higher material costs for now but expects to raise prices for customers in early 2027 if the battle continues for another three to six months.
From crude oil to t-shirts and rugs
According to Gernot Wagner, a climate economist at Columbia University School of Business, 85% of global oil consumption is in the form of fuel, with the rest going to a wide range of consumer products.
Crude oil is a complex mixture of hydrocarbons, which are compounds composed mostly of carbon and hydrogen atoms. Refineries and chemical plants separate and break them down into smaller chemical building blocks known as petrochemicals.
Six petrochemicals—ethylene, propylene, butylene, benzene, toluene, and xylene—form the main bases of plastics and synthetic materials such as nylon and polyester that manufacturers use to design and deliver products, respectively. More from the Department of Energy: Auto parts, ballpoint pens, curtains, dice, glasses, fertilizer, golf balls, hearing aids, insect repellent, skis, suitcases, floor mats and nail polish.
For many manufacturers, including those supplying carpets, clothing and tires, materials make up a large share of production costs, according to Andrew Walberer, partner and global leader of global strategy and management consultancy Kearney’s chemicals practice.
For example, take a button-down shirt. Walberer estimated that materials account for 27% to 30% of a manufacturer’s production cost. Labor costs contribute 10% to 30%. Operating expenses related to marketing, distribution and administration make up the rest, he said.
ripple effect
Experts say cost pressures will increase across the supply network if oil remains above $90 a barrel for the next few months.
Matt Priest, CEO of the Shoe Distributors and Retailers of America, said most members of the trade organization maintain two to three months of finished product inventory, providing a temporary buffer against high material costs.
Nearly 70% of the materials in synthetic shoes are petrochemical-based, and 30% of the costs of those materials are directly linked to fluctuations in oil prices, according to a report the organization released last month on the U.S. shoe industry’s “exposure to oil prices and impact on shoe costs.”
Between materials, factory energy and transportation, companies paying more for oil could translate into a 1.5% to 3% increase in the price shoppers pay for a pair of shoes by late summer and fall, the FDRA analysis estimates.
By the end of April, U.S. shoe and apparel manufacturers should begin contracting with suppliers, mostly outside the U.S., for orders of polyester fiber and polyester filament yarn so they can get their designs on retail shelves and online for the holiday shopping season, according to Nate Herman, vice president of the American Apparel and Footwear Association.
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The price of a kilogram (or just over two pounds) of the material used in polyester textiles rose from an average of 90 cents to $1.33 per kilogram before the U.S. and Israel attacked Iran, Herman said. He estimated that each garment would cost 10 to 15 cents more to produce as a result.
Another cost for importers
Some businesses are looking for ways to offset rising costs.
Lisa Lane is the founder of Rinseroo, which sells portable shower head, tub and sink accessories for cleaning, pet grooming and bathing. It recently tripled the number of slip-on hoses it sources from China each month after its manufacturer said the cost would be 30% higher in the next 30 days. He had a few days to decide whether to pre-order the three months.
Lane said ingredients in Rinseroo products contain petroleum derivatives such as polyvinyl chloride. It is also considering cost-cutting options after purchasing 240,000 units instead of the usual 80,000.
Lane said Rinseroo wants to hold off on increasing prices for retailers selling the attachments since it did so last year to offset higher U.S. taxes on imports from China. For example, the hose used to bathe pets in the bathtub has gone up from $29.95 to $33.95 on retail sites, he said.
“We want to stay in that sweet spot where people want to continue buying from us and feel like they’re getting a good value,” Lane said.
Another company that sells wound care products such as bandages, dressings, pads and sponges to nursing homes and other medical facilities plans to raise its prices by 15% in a few weeks. Gentell CEO David Navazio stated that the adhesives in the products are based on various petrochemicals.
Navazio predicted that the company’s costs, including energy and materials for production, would increase by 20%.
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Gentell, which is headquartered in Yardley, Pennsylvania, but has its main manufacturing location in Toronto, also produces private-label products for other companies, including a medical technology firm that supplies retailers such as CVS.
Since bandages and dressings are needed, Navazio said he doesn’t think his business will suffer if customer prices increase. It is less certain whether prices will fall once the war is over and oil shipments stabilize.
“I’ve seen shipping costs go down in the past, but I’ve never seen raw material prices go down,” he said.
