Why the #$@&%*! isn’t the price of plastic going down when crude oil is down 60%?
I have had countless plastic salesmen visit my office to hit me with price increases. The justification was usually that crude oil prices were going higher and the supplier had to follow. Crude oil prices have crashed from $100 to $40 while the cost of plastic has not gone down in kind.
“The U.S consumed 7.08 billion barrels of petroleum products according to the U.S. Energy Information Agency In 2015.”
You would think that plastic prices would follow crude oil and come down, but this is not the case. Plastic materials are made from hydrocarbon gas fluids which are a compound of crude oil. Manufacturers take simple hydrocarbon gas fluids from crude oil and turn them into plastic. Only 2.7% to 4.0% of crude oil is used to make common plastic materials such as: PET, PE, PS, PP, and other specialty products in the U.S.
It takes 685 gallons of crude oil to make a ton of plastic but more than 95% is refined into petroleum products such as gasoline, diesel fuel, heating oil, and jet fuel. The hydrocarbon gas fluids can be seen as gas vapors in figure 1 and represent a small fraction of the compounds made from crude oil.
Next time you hear that plastic prices are rising because of crude oil price, you will hopefully have a better understanding of the relationship of crude oil versus the price of plastic.