From plastics to explosives, the oil surge is set to spike prices well beyond the fuel pump
Andrew Mutch warns people will be paying more for their building supplies if the oil crisis continues. (ABC News: Nicolas Perpitch)
As the war in the Middle East rages on, the hike in oil prices is having an impact far beyond the petrol bowser.
Oil-based products are everywhere, and businesses are starting to feel the impact.
From petrochemicals, synthetic clothes, axle grease, and pharmaceuticals to road base, all are susceptible.
What will be more costly?
Basically, anything made from polyethylene, a petroleum-based material and the most widely used plastic in the world, is likely to be impacted.
Bitumen, used in roads, is derived from oil. As are many axle greases and waxes.
4Farmers, a Western Australian company that manufactures, imports, and distributes agricultural chemicals, is dealing with an immediate price hike to its packaging materials, which it will, in turn, have to pass on to its customers.
The company supplies farmers in Western Australia, South Australia and Victoria.
Two of their packaging suppliers have already sent them letters declaring force majeure, meaning that, due to extraordinary circumstances, they can break existing contracts and jack up prices.
"Every bit of plastic here is reliant on petro[chemicals]," 4Farmers acting general manager Cathy McKenna said.
"So we might have placed an order two, three weeks ago, but haven't received supply. It's going to have an extra cost on it."
Cathy McKenna says the increased costs will have to be passed on. (ABC News: Nicolas Perpitch)
These orders include small plastic drums, 1,000-litre containers and even the glue for cardboard boxes, she said.
"Everything is going to be impacting further down the line for everybody," Ms McKenna said,
"It's hard, we don't want to charge more than what we need to, but we have to pass on those costs."
Which industries will be hit?
Eric Lilford, the head of minerals and energy at Curtin University, said some industries, such as mining, are likely to feel the price shock on several levels.
Miners not only depend on diesel for heavy equipment, but they also use the fuel for explosives, he said.
"So [that's] a little bit of the reason why some mining costs are going up outside of the use of trucks and diesel-powered equipment," Professor Lilford said.
"A lot of your equipment on a mine is plastic-based.
Professor Eric Lilford says consumers will be hit in places they might not expect. (ABC News: Nicolas Perpitch)
"So, there's another add-on cost for the mining industry and the oil and gas industry as well. In fact, most industries."
He said consumers could feel price hikes in places they might not expect.
"What are you actually wearing? So you say … polyesters or nylons. How do you think they've arrived? Those are oil products," he said.
"Have a look at the bitumen around you. How do you make bitumen? Those are your heavier oils.
"The impact is going to be felt throughout places that people would not normally think that we are dependent on oils."
Can businesses absorb the costs?
To an extent.
Andrew Mutch and his family have owned Synergy Building Supplies in Perth for the past 20 years.
They provide concrete, epoxy, paint and other coatings for the home building, decorative and construction industries throughout Western Australia.
Their epoxy products and solvents, polymers and plastic containers are all petroleum-based in some way.
He has been notified by his epoxy suppliers that import prices will be going up, likely by at least 12 per cent.
Andrew Mutch says the full impact is still to be known. (ABC News: Nicolas Perpitch)
He has several shipping containers with new stock already on the way, but there were no guarantees that oil prices would be lower by then.
"We've got many on the water right now, and they're coming in. Those are probably going to be OK, but is it in a month or is it two months? That's when the bite is going to kick in," Mr Mutch said.
He wanted his customers to know he was not taking advantage of the crisis to just put prices up, but there was only so much he could bear.
"Absorbing all of that is impossible; it has to get passed on at some point," he said.
"So people are going to be paying more for their building materials."
Are there alternatives?
According to Professor Ilford, it is a work in progress.
"We're moving in that direction, so to answer it simply, we are probably not at the stage to replace everything that is oil-based," Professor Lilford said.
"However, there's a cost, and you and I are going to bear the brunt of the cost.
"Working at an academic institution, there's a lot of research going on about what else we could do.
"We've got a fair way to go before we can wean ourselves off oil and oil-based products."
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