Bottled water is expected to become more expensive across the United States in the coming weeks, according to experts, as the Iran war’s roiling of global oil markets increases costs of plastic production.
Oil prices have surged past $100 a barrel — and the Trump administration is preparing for the “nightmare scenario” of $150 a barrel— since the U.S. and Israel launched joint military strikes on Iran in late February.
The conflict has essentially shut down the Strait of Hormuz, previously used by ships to transport around 20 percent of the world’s oil supply each day. With the strait shuttered, the cost of oil has skyrocketed around the world — and its high cost is having a knock-on effect on other industries. Oil derivatives are one of the key raw materials used in making most plastics.
Patrick Penfield, a professor of supply chain practice at Syracuse University, told Newsweek that he expects to see a 5 per cent increase in the price of plastic bottled drinks this month in the U.S.
“If we continue to see oil prices climb to $125 to $150 a barrel, it could double to 10 percent in May and if oil reaches $200 a barrel, we will see a price increase of 25 to 30 percent,” he said.
Nine in 10 Americans buy bottled water, and about one in five people drink it exclusively.
Matt Slutzker, a principal analyst at global research group Wood Mackenzie, told the outlet he has already seen “price increase announcements from prominent plastic producers.”
“Those food and beverage brands will look to pass along those costs within their products,” he said, adding that Americans “definitely can expect bottled water prices to increase in the U.S. as a result of the Iran War.”
Bottled water costs have already surged in other parts of the world amid the Iran war. In India, a gas shortage has caused bottled water to become 11 percent more expensive.
But since the U.S. produces most of its ethylene, a key ingredient used to make plastic products, it may not see such a dramatic rise in prices, other experts said.
“There might be a slight upward pressure on bottled water prices in the U.S., but not a substantial one, such as India,” Kenneth Gillingham, a professor of economics at Yale University, told Newsweek.
But Thomas Duncan, a professor of economics at Radford University, warned that prices will likely continue to rise in the U.S. even after the Strait of Hormuz re-opens.
“Even companies that have a stock might start to creep up prices in anticipation of future costs,” he said. Duncan also warned that if Americans rush to buy bottled water now, in anticipation of prices going up, the “increased demand will push prices up in current markets and deplete the stock faster.”
Oil prices ticked up to $104 a barrel Wednesday despite reports that the U.S. and Iran may be getting closer to negotiating an end to the war.
On Tuesday, President Donald Trump claimed the war will be over in “two to three weeks” and that when it does the price of oil will drop.
“All I have to do is leave Iran, and we’ll be doing that very soon, and they’ll tumble down,” he said.
The president is scheduled to give a national address with an “important update on Iran” Wednesday night.
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