While spiking petrol prices are having a direct effect on purchasing power here in France, the drastic increase in petroleum prices is indirectly affecting other industries, including the fashion industry. Here are the explanations.
Contrary to our best hopes, the public health crisis in no way called our lifestyles and thus our energy usage into question. Our societies are still very much reliant on fossil-fuel energies – including petroleum – and according to analysts will remain so for at least the next five years. Yet for over a year now, petroleum prices have been rising constantly and this increase is due to multiple factors:
Recovery from the pandemic
Even though it occurred in several stages depending on the different variants, the recovery that followed the peak of the Covid-19 pandemic caused a sudden rise in petroleum demand. It did so even though production had plummeted (with the all-time lowest price of €17 per barrel being reached in April 2020). However, the majority of petroleum-producing countries have not managed to increase production to match demand.
In January 2022 the OPEC countries did decide to gradually increase their petroleum exports, but they are having trouble increasing their production, as are Nigeria, Angola and Libya. Yet the USA has not managed to get back to its pre-pandemic production level, either. The logical consequence: a steady increase in the price of crude oil such as Brent (North Sea crude oil, the reference for determining the price of petroleum in Europe). After plummeting in 2020, by October 2021 the price had recovered, reaching its highest point since 2018 (i.e. €72 per barrel) and this rise has continued since December 2021.
The consequences of the war in Ukraine
According to the French national statistics office INSEE, Russia is the world’s third largest oil producer at 10 million barrels per day. Two million of these are shipped over to Europe. However, oil prices soared amid growing fears of a Western embargo on Russian hydrocarbons or a halt to deliveries by Moscow after the outbreak of the Russian-Ukrainian war. Two weeks after the invasion, the price reached USD 139 per barrel, only to fall back to USD 106 (EUR 98) on 24 April. These are increases of 20-30% compared to 1 January.
The conflict could have very significant repercussions. In the words of French Economy Minister Bruno Le Maire in March 2022: “this energy crisis in 2022 is comparable in impact and suddenness to the petroleum crisis of 1973”. The International Energy Agency (IEA) fears a “global oil supply crisis”, and the threat of an oil price of more than USD 150 per barrel is looming.
The immediate consequences of the rise in the price of petroleum on the textile industry
In the fashion sector, the rise in the price of petroleum impacts on:
- The price of some raw materials
The cost of petroleum has direct impact on the price of textiles since it is the starting point for the manufacture of synthetic fabrics such as polyester (whether new or recycled), polyamide, elastane, nylon and acrylic.
- Related costs
Freight transport is also affected. It is already being hit by coronavirus, at a time when the world’s leading port of Shanghai has been at a virtual standstill due to lockdowns since February 2022. But the repercussions of the rise in petroleum prices also play a role in this, as they do for all goods. Thus container shipping costs have almost quadrupled compared to before the public health crisis. These increases inevitably get passed on in the prices of textiles like clothing.
Fast Fashion “unconcerned” in the short term
In late 2021 – before the second petroleum crisis – the heavyweights of the textile market were still “optimistic” to some degree. At that point, the cost of synthetic materials had increased by “only 20%” far less than that of natural materials. Associated British Foods, the parent company of British behemoth Primark, assured AFP at the time that the increase in its manufacturing costs would not lead to a price increase, thanks to a favourable exchange rate and a drop in store running costs. In addition, H&M of Sweden said it was “used to fluctuations in raw material costs and other external factors that could potentially impact purchasing costs”.
Soaring natural textile raw material prices
If petroleum were the only commodity to be affected by high inflation, the impact on the textile market would be limited. But this is not the case. Instead, the cost of natural raw materials used in the textile industry has risen sharply since 2019. Moreover, given that it takes 12-18 months to see the full impact of raw materials choices on so-called “standard” brands – the time it takes to purchase fabrics, create and then produce the collections – we will likely not see the full impact of these various price increases on raw materials choices until 2023.
Cotton, wool and silk
In February 2022 the price of cotton reached its highest level: USD 1.29 per pound (EUR 1.16 for about 0.45kg), an increase of some 45% in the space of a year. Only way back in July 2011 was a higher price recorded. The explanation: while the USA is the third largest producer – after China and India – and the world’s largest exporter, it is facing a prolonged drought in several regions of the cotton belt in the southern states. India is also not managing to return to its pre-2020 production level, for weather-related reasons, since the monsoons were less severe in 2021. The organic sector is even more heavily affected. In the space of year, prices have increased by 90%. The price of wool rose by 43% between September 2020 and September 2021, and that of silk by almost 32%.
Flax and hemp prices also on the rise
In the aftermath of the pandemic and the first increases, there was a move towards more sustainable and local materials. This latter argument could become a factor in economic as well as responsible decision-making, which has not been the case until now. While flax and hemp are sustainable choices, they are now economical ones, too.
Thus, now in spring 2022, linen is making remarkable inroads in collections, from Uniqlo to Ralph Lauren and from Petit Bateau to Comptoir des Cotonniers. Demand for this fibre has been growing constantly over the last ten years, driven in particular by China and India. France is the world’s leading linen producer, accounting for 80% of global production (160,000 tonnes produced and 130,000 tonnes exported in 2021).
As for hemp for textiles, France is the leading EU producer and the world’s fourth largest (behind China, Canada and the USA). In 2021, 20,0000 hectares were planted. Demand for hemp for clothing production is as yet limited to very “principled” lines. But amid considerable rises in production and transport costs, and with some French players having started a reshoring process by reinstating French spinning mills, fibres “Made in France” are thriving.
It’s clear to see that the rise in petroleum prices has significant direct and indirect implications for the textile industry. The first to hit will definitely be an increase in the price of finished products, i.e. an increase in retail prices. But in years to come, producers will probably seek out new raw materials that require less energy to produce and are less dependent on petroleum and fossil fuel in general.