If the soaring price of gasoline at the pump has a direct impact on the purchasing power of the French, the drastic increase in the price of a barrel of oil has an indirect impact on other industries, including fashion. Explanations.
Contrary to what we might have hoped, the health crisis has in no way led to a questioning of our lifestyles and therefore of our energy consumption. The dependence of our societies on fossil fuels – including oil – remains very strong, and according to analysts will be for at least the next five years.
However, for over a year, the price of a barrel of oil has been rising and this increase is due to multiple factors:
Post-epidemic recovery
Although it took place in several stages depending on the different variants, the recovery that followed the height of the Covid epidemic caused a sudden increase in demand for oil, even though production had fallen sharply (with the historically low record in April 2020 at €17 per barrel). However, the majority of oil-producing countries have not managed to increase their production to the level of demand.
Of course, OPEC member countries decided in January 2022 to gradually increase their oil exports, but they are struggling to increase their production, as are Nigeria, Angola and Libya. However, the United States has also not managed to return to its pre-crisis production level. The logical consequence: a constant increase in the price of a barrel of crude oil and Brent (North Sea crude oil, the reference for determining the price of oil in Europe). After falling sharply in 2020, its price returned to its highest price since 2018 in October 2021 (i.e. €72 per barrel) and this rise has continued since December 2021.
The consequences of the war in Ukraine
According to INSEE, Russia is the world's third largest oil producer with 10 million barrels per day, 2 million of which transit to Europe. However, as fears of a Western embargo on Russian hydrocarbons grew, or of a halt in deliveries by Moscow after the outbreak of the Russo-Ukrainian war , oil prices soared. Two weeks after the offensive, the barrel reached 139 dollars per barrel, before falling back to 106 (€98) on April 24. These increases fluctuate between 20 and 30% compared to January 1.
The conflict could have very strong repercussions, according to the words of the Minister of Economy Bruno Le Maire in March 2022: "this energy shock of 2022 is comparable in intensity and brutality to the oil shock of 1973". A "global oil supply shock" is feared by the International Energy Agency (IEA), and the threat of a barrel at more than $150 looms.
The immediate consequences of the rise in the price of oil on the textile industry
In the fashion sector, the increase in the price of oil is reflected in:
- On the price of certain raw materials
The cost of oil has a direct impact on the price of textiles since it is the basic product for manufacturing synthetic fabrics , such as polyester, polyamide, elastane, nylon, acrylic or even recycled polyester. - On additional costs
The transport of goods is also affected. It is already affected by the coronavirus, when the world's largest port, Shanghai, has been virtually at a standstill due to lockdown since February 2022. But the repercussions of the rise in oil prices are also playing a role here, as with all goods. The price of transporting a container has almost quadrupled compared to before the health crisis. Increases that can only be passed on to the price of fabrics and clothing.
Fast Fashion “Not Worried” for the Time Being
At the end of 2021 – before the second oil boom – the textile market giants were still displaying a certain “optimism”. At that time, the cost of synthetic materials had increased “by only 20%”, much less than that of natural materials.
Associated British Foods, the parent company of British giant Primark, assured AFP that the increase in its manufacturing costs would not lead to a price increase, thanks to a favorable exchange rate and a drop in store operating costs. And Sweden's H&M assured that it was "accustomed to fluctuations in the cost of raw materials as well as other external factors that could potentially impact purchasing costs."
The soaring prices of natural textile raw materials
If oil were the only raw material to experience high inflation, the consequences on the textile market should remain limited. However, this is not the case. Indeed, the cost of natural raw materials used in the textile industry has increased significantly since 2019. Furthermore, knowing that it takes between 12 and 18 months to see the full impact of the choice of raw materials on so-called "classic" brands - the time taken to purchase fabrics, create and then produce collections - it is probably not until 2023 that we will see the full impact of these various price increases on the choice of materials.
Cotton, wool and silk
In February 2022, the price of cotton reached its highest level: $1.29 per pound (€1.16 for around 0.45 kg), an increase of almost 45% over a year. You have to go back to July 2011 to find a higher price. The explanation: while they are the third largest producer – after China and India – and the world's largest exporter, the United States is facing a prolonged drought in several regions of the "cotton belt" (cotton belt, in the southern states). India is also unable to return to its pre-2020 production level due to weather reasons, with the monsoons having been less significant in 2021. The organic sector is even more affected. Over the course of a year, prices have increased by 90%.
Wool saw its price increase by 43% between September 2020 and September 2021, and silk by almost 32%.
Flax and Hemp also on the rise
In the aftermath of the pandemic and the first increases, we have seen a craze for more "sustainable development" and more local materials. This last argument could become a factor in economic as well as responsible decision-making, which was not the case until now. If linen and hemp are sustainable choices, they are now also economical.
Thus, in this spring of 2022, linen is making a remarkable surge in collections, from Uniqlo to Ralph Lauren, from Petit Bateau to Comptoir des Cotonniers. The demand for this fiber, of which France is the world's leading producer (with 80% of global production, or 160,000 tons produced and 130,000 tons exported in 2021), has only increased for ten years, driven in particular by China and India.
As for hemp for textiles, France is the leading European producer and the fourth largest producer worldwide (behind China, Canada and the United States). In 2021, 20,000 hectares were planted there. For the moment, its demand for clothing manufacturing remains limited to very "committed" lines. But while production and transport costs are increasing considerably, and some French players have started relocation work by recreating French spinning mills, "Made in France" fibers are on the rise.
As we can see, the increase in the price of oil has strong direct and indirect implications for the textile industry. The first will probably be an increase in the price of finished products, i.e. an increase in prices in stores. But for the years to come, it is likely that manufacturers will seek to turn to new raw materials that are less energy-intensive and less dependent on oil, and fossil fuels in general.
