Iran War's Hidden Cost: How Petroleum Price Hikes Affect Everyday Products
The most immediate and tangible effect of the Iran war for many people outside the Middle East has been soaring gasoline prices. However, the conflict's economic impact extends far beyond fuel costs, reaching into thousands of everyday consumer products that rely on petroleum derivatives.
From Soft Toys to Synthetic Fibers
It might be difficult to imagine the Iran war affecting stuffed toys with names like Snuggle Glove, Bizzikins, and Wobblies, but even plush playthings are not immune when oil shipments from the Middle East are constrained. Like many soft toys, these creatures developed by a manufacturer in Fort Lauderdale, Florida, are made with polyester and acrylic—synthetic fibers derived directly from petroleum.
Three weeks after the war started, suppliers in China notified Aleni Brands that obtaining these materials was already costing them 10% to 15% more, according to CEO Ricardo Venegas. "I think this situation demonstrates how much oil permeates throughout our system, and we can't get away from it," said Venegas, who founded Aleni Brands last year. "Who would have thought that the price of a toy would have a direct relationship with oil?"
The Vast Reach of Petrochemicals
Petrochemicals derived from oil and natural gas go into manufacturing more than 6,000 consumer products, according to the U.S. Department of Energy. This extensive list includes:
- Computer keyboards and tennis rackets
- Lipstick and soft contact lenses
- Detergent and chewing gum
- Shoes and crayons
- Shaving cream and pillows
- Aspirin and dentures
- Tape, umbrellas, and nylon guitar strings
While travelers are seeing higher airfares and flight fees as airlines respond to rising jet fuel costs, and consumers may pay more for food and furniture transported by diesel trucks, crude oil isn't just refined as fuel. It gets transformed into chemicals, waxes, oils, and other mixtures that appear in a vast array of everyday items, including most products made with plastic and rubber.
Manufacturing Cost Pressures
With disruptions to global oil supplies now in their eighth week, higher production costs could make numerous items more expensive for shoppers, according to trade groups and companies. While 85% of global oil consumption is in fuel form, the remaining 15% goes into a wide range of consumer products, explains Gernot Wagner, a climate economist at Columbia University's School of Business.
Crude oil is primarily a complex mixture of hydrocarbons—compounds made of carbon and hydrogen atoms. Refineries and chemical plants separate and break these down into smaller chemical building blocks known as petrochemicals. Six key petrochemicals—ethylene, propylene, butylene, benzene, toluene, and xylenes—form the major foundations of plastics and synthetic materials like nylon and polyesters.
Specific Industry Impacts
Materials account for a significant share of production costs for many manufacturers, including those supplying carpets, clothing, and tires, according to Andrew Walberer, partner and global lead in the chemicals practice at global strategy consultancy Kearney. For a button-down shirt, Walberer estimates materials account for 27%-30% of manufacturing costs, with labor contributing 10% to 30%, and business expenses comprising the remainder.
In the footwear industry, roughly 70% of materials in synthetic shoes are petrochemical-based, with 30% of those material costs directly tied to oil price fluctuations, according to a recent Footwear Distributors and Retailers of America report. Their analysis estimates that between materials, factory energy, and transportation, companies paying more for petroleum could translate into a 1.5% to 3% increase in shoe prices by late summer and fall.
Business Responses and Strategies
Some businesses are implementing strategies to offset rising costs. Lisa Lane, founder of Rinseroo, which sells portable shower head and sink attachments, recently tripled her monthly order of slip-on hoses from China after her manufacturer warned of a 30% price increase within 30 days. Rinseroo's products contain petroleum derivatives like polyvinyl chloride, and Lane is now evaluating cost-cutting options while trying to avoid price increases for retailers.
Another company, Gentell, which sells wound care products to nursing homes and medical facilities, plans to raise prices by 15% in coming weeks. CEO David Navazio noted that adhesives in their products rely on several petrochemicals, and with energy for production and materials combined, the company's costs are increasing by approximately 20%.
Long-Term Uncertainty
Experts warn that if oil remains above $90 per barrel for the next several months, cost pressures will accelerate throughout supply networks. While some businesses maintain inventory cushions—most footwear retailers keep two to three months of finished products—these provide only temporary protection against higher materials costs.
The timing is particularly challenging for apparel manufacturers, who need to sign contracts with suppliers by the end of April for polyester materials to ensure products reach retail shelves for the holiday shopping season. According to Nate Herman of the American Apparel & Footwear Association, the price of materials used in polyester textiles has increased from 90 cents per kilogram before the war to $1.33 per kilogram currently, adding 10 to 15 cents to each garment's production cost.
Looking ahead, there's uncertainty about whether prices will decrease once the war ends and oil shipments stabilize. "In the past, I've seen transportation costs come down, but I've never seen prices of raw material come down," Navazio observed, highlighting the potential for lasting economic effects from the current conflict.
