Global oil crisis spreading to many sectors.\nA month after the war in Iran began, the
crude shortage has grown more severe and threatens to become worse: a shortage of almost everything.\nConflict in the Middle East disrupted flows of oil and natural gas through the Strait of Hormuz, causing global supplies to fall by about 20%. This disruption not only drives
fuel prices higher, but also chokes petrochemical feedstocks — essential inputs to making everyday consumer goods such as shoes, clothing, and plastic bags.\nThat pressure is now spreading across all corners of the consumer
market as prices for materials like plastic, rubber, and polyester rise in tandem. The clearest impact to date is in Asia, a region that accounts for more than half of global manufacturing and is heavily dependent on oil imports and other commodities.\nIn Korea, where people rushed to stockpile trash bags, the government has urged organizations to minimize single-use items. Taiwan opened a hotline to assist manufacturers running out of plastic feedstock, while rice farmers in the area say they may need to raise prices because vacuum bags cannot be purchased.\nIn Japan, the oil crisis has raised concerns that chronic kidney disease patients may be unable to access treatment due to a shortage of medical-grade plastic tubing used in dialysis. glove manufacturers in Malaysia say shortages of a petroleum by-product — a material necessary to produce rubber gloves — are threatening the global supply of medical gloves.\n“This spreads very quickly from oil disruption and shipping to petrochemicals and then to consumer goods,” said Dan Martin, Co-Director of the Business Intelligence unit at Dezan Shira & Associates, a consultancy that helps international businesses expand in Asia.\nThe cause is plastic caps, plastic bins, snack bags and containers becoming harder to buy. Mr. Martin added that petroleum derivatives are also needed to produce adhesives for footwear and furniture, industrial lubricants for machinery, and solvents for paints and cleaning processes.\n"The spread from disruptions in oil and shipping to chemicals and then to consumer goods is occurring very rapidly," he said.\nThe turmoil in commodity markets and manufacturing is creating global inflationary pressure and dragging on economic growth. Manufacturers are paying more for energy and raw materials, eroding margins and pushing up consumer prices. Soaring fuel costs are disrupting the travel and logistics sectors, while tight supplies of other inputs from the Middle East — such as fertilizers and helium — could make food and electronics more expensive.\n"The spillovers are complex and moving in many directions," the IMF wrote in a blog post dated March 30. "Although the war could shape the global economy in various ways, all paths lead to higher prices and slower growth."\nNo escape.\nCountries have begun releasing record amounts of oil from emergency reserves to mitigate the war’s impact. But much of the widening supply constraint stems from a shortage of naphtha — a by-product of oil and a key input for synthetics — which producers have little stock of and for which there are no readily available substitutes.\nSome petrochemical companies in Asia — a region that imports more than half of the world’s naphtha from the Middle East — have cut production or declared force majeure in recent weeks due to feedstock shortages.\nSouth Korea has taken advantage of the United States pausing sanctions on certain oil and oil products from Russia to buy the first lot of naphtha from Moscow since the Ukraine war erupted. The country has also imposed export restrictions on naphtha to safeguard domestic supply.\nMr. Martin, who works directly with manufacturers in Vietnam, says the naphtha shortage is driving up input costs for his clients, especially for companies producing products with strict technical specifications such as semiconductors, auto parts, and packaging for medical devices or food.\n"There aren’t many options left besides scaling back assembly and consuming less energy," he said. "Everyone is competing. We’re all in the same boat."\nOther companies are trying to cut costs by reducing plastic use in packaging. In Indonesia, where plastic prices have doubled in a month, several firms are thinning packaging film. Some Indian media have noted rising bottled water prices as plastic caps have surged. Nongshim — Korea’s largest instant noodle maker — says their plastic packaging supplier now has only about a month of stock.\nShariene Goh, Senior Petrochemical Analyst at ICIS, says consumer goods heavily dependent on plastic packaging — such as cosmetics — may be more vulnerable to shortages than some plastic-containing goods.\n"Finished goods segments can rely on existing inventory, but those inventories will eventually run down," she said. "I think they may run out soon."\nThe crisis is spreading west.\nAsia, the region that first felt the fuel shock, is signaling bad news for the rest of the world if oil and other resources cannot be produced or transported from the Middle East. In addition to producing about 17% of the world’s naphtha and 30% of plastic resin, the Middle East provides 45% of sulfur (used in fertilizer production), 33% of helium (used in semiconductors, medical, and aerospace applications), and 22% of urea and ammonia (crop nutrients), according to Morgan Stanley data.\nU.S. farmers have had to buy more expensive fertilizer as the price of imported urea rose about one-third since the war began. In India, condom manufacturers report disruptions due not only to feedstock packaging materials and silicon oil — inputs for petrochemicals — but also ammonia.\n"Like during COVID-19, the shock is unfolding in stages rather than all at once. This is a wave of supply-chain disruption spreading westward," JP Morgan analysts wrote in a research note last week.\nIn recent weeks, Asian countries have focused on curbing the price shock through stock releases, price controls, and reduced working hours to save energy. But JP Morgan says supply constraints will worsen in April as the final shipments of crude tied to the war are expected to arrive at ports early that month.\n"The main challenge has shifted from price to physical shortage," the bank analysts said. "Asia is no longer merely in a preventive mode."\nAnalysts say some consumer goods producers are delaying purchases of raw materials in hopes prices will cool if the Middle East conflict ends.\n\n(Images and captions omitted for brevity in this translation.)\n
