Why Oil Prices Are Volatile


“The price of (fill in the blank oil) has gone up 25% since I bought it last! Where can I get it for less? Why do prices bounce up and down for oils, anyway?”

We all know how it is. We carefully calculate prices for our goods, only to find that the price of one of our key ingredients rose dramatically since the last time we ordered.

It is inevitable. Most of us do not follow the oil market carefully and neglect to link world events to the cost of the oils we treasure for making soap, bath and body items and even candles, so we are at the mercy of each increase.

Why do prices increase? They happen for many reasons:

  • Climate – drought, rain, heat and cold negatively affect crops, resulting in less product to sell. Jojoba oil is one such example. A severe drought in the US southwest caused the price of jojoba to skyrocket a number of years ago.
  • Political conditions—war and other political factors dry up the resources of a region, making it impossible to tend to crops and produce oil or make it difficult to export.
  • Fuel and shipping costs—the cost of fuel rises and the cost of shipping follows, raising the price of any oil, not just the cost of shipping to you. The annual increase in shipping rates illustrate the point.
  • Industry demand—the more in demand the oil is, the higher the price is likely to rise, even if the demand is in a separate industry. One industry commands more oil, making it less available and more expensive for our relatively small industry.
  • Indirect sources—the cost of products required for production, real estate, labor, anything that increases costs result in a price increase to us, as well.
  • Import/Export laws and regulations—when a country increases import duties for incoming oils from out of the country or increase tariffs for exports, price increases are sure to follow.
  • Popular demand—the whims of a fickle public can drastically affect the desirability or undesirability of an oil and thus increase or decrease the price, depending on the ability of the sources to adapt. The US is ceasing the production of hydrogenated oils in the next few years, which will affect the soapmaking industry, to some extent, but more, the soy candle industry, which is scrambling to develop new waxes.

Good or bad, these factors affect the pocketbook. But what can we do? We have no control over wars or weather, but we can learn where our oils come from and be aware of events and conditions that may affect us. Where shipping is concerned, we can exercise vigilance in ordering to save on shipping costs. Finally, we can put our knowledge of fatty acids and other properties of oils to work and make substitutions when the situation calls for them.

We are subject to world markets, like any business. Much of it is unavoidable, but taking these few steps will give us some control over price increases.

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