Petrochemical Industry Reaches 'Breaking Point' as Soaring Oil Prices Force Price Increases

Oil Price Surge Doubles Base Oil Costs
Price Hikes Spread to Packaging Materials and Medical Consumables

The petrochemical industry has reached the "limit of endurance" where it can no longer absorb rising costs. With international oil prices soaring due to instability in the Middle East, both the passing on of higher prices and supply instability are now becoming a reality.

On the 2nd, engine oil was displayed at a supermarket in downtown Seoul. Photo by Yonhap News Agency

According to industry sources on April 8, international oil prices have continued to surge recently, driven by instability in the Middle East. Brent crude and WTI (West Texas Intermediate) have been trading above 100 dollars per barrel, with some spot transactions reportedly exceeding 140 dollars. The increase in oil prices has been pushing up the prices of basic raw materials such as naphtha and lubricant base oil, which is rapidly pressuring the manufacturing costs across the petrochemical product spectrum.

The problem is not just the increase in costs itself, but the fact that it has reached a level that can no longer be absorbed internally. The industry has so far suppressed price hikes as much as possible, taking into account the burden on suppliers and the impact on inflation, but the prolonged rise in the prices of raw materials and subsidiary materials has resulted in a cumulative deterioration of profitability.

In particular, the burden on the lubricant industry is emerging first and foremost. Lubricant base oil, the key raw material for lubricants, is produced during the crude oil refining process, so it is directly affected by rising oil prices. Recently, the price of base oil is said to have nearly doubled. Normally, even a 20-30% increase in base oil prices significantly increases cost burdens, but the current increase far exceeds that level.

As a result, signs of supply instability are also appearing in the market. There have been reports of temporary shortages of certain products caused by a rush of pre-orders in anticipation of further price increases. An industry insider commented, "While gasoline and diesel are heavily influenced by policy, lubricants have no choice but to reflect cost fluctuations in their market prices. At the current level of cost increases, it is no longer possible to absorb the burden internally."

This burden is now spreading to other petrochemical product groups such as plastics and paints. The price of basic feedstocks, which have surged following naphtha cracking, is causing plastic product prices to rise, while paints with a high proportion of resin and solvents are also experiencing rapidly increasing production costs.

Such cost pressures are spreading to downstream industries including construction, food, and medical sectors. The construction industry is facing growing pressure from rising construction costs, while the food industry is confronted with higher packaging material prices and supply instability. The medical device industry is also moving to increase prices for consumables such as disposable syringes.

The industry believes that for lubricants, plastics, packaging materials, and medical consumables in particular, which are outside the scope of policy-driven price controls, cost increases are highly likely to be passed directly on to market prices. There are also concerns that if instability in the supply of basic raw materials such as crude oil and naphtha continues, it could lead to reduced production or delivery delays.

A source in the petrochemical industry stated, "With raw material, energy, logistics, and packaging costs all rising simultaneously, there is a clear limit to how long these burdens can be absorbed internally. If price increases are delayed, it could lead to production cutbacks or even suspension of deliveries."

This content was produced with the assistance of AI translation services.