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Consumer Goods · Inflation · Oil Prices · Supply Chain
Oil's pervasive use in thousands of products, from golf balls to shampoo, means that energy shocks, like the one triggered by the Iran war, rapidly translate into widespread consumer price increases due to shortened lag times between cost and price adjustments, as noted by Harvard Business School economist Alberto Cavallo.
Petroleum is a key ingredient in thousands of products, with content ranging from 40% in plastic-heavy goods to 1% in liquids like shampoo, according to Christie Sayes, a professor of environmental science at Baylor University. Specific examples include chewing gum (15% to 30% petroleum-derived gum base), golf balls (synthetic polymers), toothpaste (glycerin, detergents, synthetics), aspirin (petroleum-based ingredients in production), and balloons (synthetic rubber, polyester film).
The Middle East conflict also impacts helium supply, a natural gas byproduct, creating a "double whammy" for some products. Modern clothing relies on oil-based synthetic fibers like polyester and nylon, while makeup contains mineral oil and synthetic waxes.
Alberto Cavallo states that large shocks travel fast, and digitization has accelerated companies' price decisions. Analysts report that most large companies hold only two to four weeks of petrochemical inventories, which are expected to dwindle in late March.
