WASHINGTON—As of March 11, crude oil futures were selling at $39.44 per barrel, according to statistics from the U.S. Energy Information Administration.
This figure was up nearly $1 from the week before, but down $4.52 from the year before, the EIA said. The futures price went as low as $26.21 per barrel on Feb. 11, compared with prices that regularly exceeded $100 a barrel throughout 2014.
To manufacturers and suppliers in the tire industry, the bottoming out of oil prices early this year was not a major event, though not inconsequential either.
“Obviously, these lower oil prices have more people driving, putting in more miles and embarking on longer trips,” said a spokesman for Michelin North America Inc. “That obviously increases the demand for Michelin tires.
“The price of oil does not play a major role in what the consumer pays for a Michelin tire or the cost of manufacturing a tire,” the Michelin spokesman said. “The real factor is that rubber prices have been down, and obviously that has a big impact on the price of manufacturing tires.
“However, we know that rubber prices are and will remain volatile,” he said. “It is very difficult to predict, which is why we do not assume prices will remain this low.”
With the slump in oil and gas prices, Michelin does see lower demand for its earthmover tires, the spokesman said. However, lower gas prices will be a positive factor in the truck tire sector, because it means lower operating costs for truck fleets, a greater demand for truck tires and more money to buy them, he said.
From Goodyear's standpoint, the biggest impact of lower oil prices has been lower raw material costs, according to a Goodyear spokesman.
“About two-thirds of our raw material costs are for petrochemical-based materials, and thus influenced by oil prices—synthetic rubber, carbon black, pigments, chemicals, oils, fabric,” he said.
Raw materials account for about half the cost of goods sold (CGS) for Goodyear's tire business, and tires account for about 85 percent of the total CGS at the company, the spokesman said.
In 2015, Goodyear's tire CGS accounted for $10.3 billion of a $12.2 billion total, according to the spokesman. This compared with a 2014 tire CGS of $11.8 billion out of a $13.9 billion total, he said.
Tire raw materials cost Goodyear $5.9 billion in 2014 and $5.2 billion in 2015, according to the spokesman. Oil-based raw materials ran $3.9 billion in 2014 and $3.4 billion in 2015, he said.
While the price of natural rubber has become quite low, lower oil prices haven't had much to do with that, according to Greg Jagt, vice president of trading at Oakville, Ontario-based Astlett Rubber Inc.
“There has been a small effect on transportation and distribution, considering that natural rubber comes from halfway around the world,” Jagt said.
Bunker costs—the cost of fuel used aboard ship to transport goods to port—have come down in the past 12 months, according to Jagt. But industry overcapacity has had more of a downward effect on NR prices than bunker costs, he said.
From the standpoint of synthetic rubber, lower oil prices are a mixed blessing, according to Juan Ramon Salinas, managing director of the International Institute of Synthetic Rubber Producers.
The IISRP does not monitor or discuss SR prices except in the most general terms, according to Salinas. However, lower prices for petrochemical feedstocks and transportation have reduced prices in turn for SR producers, he said.
“It's not necessarily an advantage if everybody has it, but it's a good thing to have,” he said.
On the other hand, lower prices for feedstocks translating to lower prices for various grades of SR also mean lower profits for manufacturers, just as lower oil prices have meant lower prices for petroleum producers, Salinas said.