Why Does Crude Oil Affect Plastic Prices? Here's the Explanation
The war between Iran and the United States that is currently underway has caused disruptions to the distribution of crude oil and petrochemicals through the Strait of Hormuz. This not only drives up oil and fuel prices but also impacts the rise in plastic prices.
Quoted from Reuters, the surge in crude oil and raw material prices since the Iran-United States war began has caused prices of plastics such as polyethylene (PE) and polypropylene (PP) to skyrocket. Global logistics have also been disrupted, with around 50% of PE supplies halted, limited, or affected.
So, why does the disruption in crude oil distribution affect plastic prices? What is the connection between the two? See the explanation below!
Where Does Plastic Come From?
Oil supply and prices can affect plastic prices because one of the raw materials for plastic is crude oil. Quoted from the Center for International Environmental Law website, more than 99% of plastics are made from chemicals derived from fossil fuels.
According to information from Live Science, plastic is made from molecules called polymers. The polymers that form plastic can come from natural sources, such as corn starch, vegetable fats, to bacteria. In addition, plastic can also be made from crude oil and natural gas.
The process of making plastic from crude oil begins with extracting hydrocarbons in the form of crude oil from within the earth. Crude oil is then heated to separate the hydrocarbons into several groups based on the number of atoms and their molecular weight.
The result of this separation will produce several different chemical groups, such as petroleum, gasoline, to paraffin. Petroleum or natural gas is then distilled to produce naphtha, a chemical substance that becomes one of the main ingredients of plastic.
Quoted from the Desu Tech website, crude oil is not only used as a raw material for plastic. The results of crude oil distillation are also needed as energy to drive the plastic processing process, such as polymerisation, extrusion, to resin pellet production. Based on an article from the Journal of Mechanics and Thermal Systems by Surono and Ismanto, around 1.75 kg of crude oil is needed to make 1 kg of plastic, both as raw material and fuel/energy in plastic processing.
How Do Oil Prices Affect Plastic Prices?
Summarised from the Desu Tech and MIT Technology Review websites, plastic supply and prices are influenced by several factors, ranging from rises in crude oil and energy prices, geopolitical conflicts, transportation and logistics costs, to increased demand.
Geopolitical conflicts, especially in areas that are major producers of oil and petrochemical raw materials, become one of the factors that significantly impact the supply of oil and petrochemical materials for making plastic. Such situations can hinder supply delivery routes, raw material exports-imports, to production capacity.
The Middle East, for example, now produces 20% of the global naphtha supply and is a supplier to around 40% of the Asian market. The war occurring in Iran has ultimately caused naphtha prices to rise, even reaching 50% in March 2026.
This condition has led to a global increase in plastic prices. Prices of polypropylene, which is made from naphtha and used in making bottle caps to food containers, continue to rise, especially in Asia.
India’s largest bottled water supplier recently announced that it will raise prices by up to 11% after packaging prices rose by up to 70%. This situation will also affect other products, such as daily necessities to plastic toys.
Ways to Respond to Rising Plastic Prices
In facing the problem of rising plastic prices, the best step that can be taken is to reduce its use as much as possible, especially single-use plastic. You can maximise the repeated use of containers and bags. In addition, you can also switch to various alternatives to replace plastic bags/packaging, such as banana leaves, woven bamboo, palm leaves, teak leaves, paper, and so on.
Thus, the explanation of why crude oil affects plastic prices. Hopefully it answers your curiosity!