US Gulf Coast ethylene prices have moved sharply higher in the weeks since the war with Iran escalated, but the real driver is a shift in global feedstock economics.
As oil prices rise, so do the costs of oil-linked petrochemical feedstocks such as naphtha and LPGs, which still make up the majority of the global petrochemical feedstock slate. That dynamic is lifting ethylene prices globally, including on the US Gulf Coast (see figure at right).
The disruption of shipping through the Strait of Hormuz is amplifying that pressure. According to the International Energy Association (IEA), roughly half of LPG exports moving through the strait ultimately are consumed for petrochemicals. Any disruption to those flows tightens global feedstock availability and raises the marginal cost of ethylene production.
At the same time, US petrochemical producers are largely insulated from the feedstock price shock. Most Gulf Coast crackers are designed to use ethane, which remains priced much closer to natural gas than to oil and has not seen the same price movement as LPG or naphtha. The result is that ethylene prices are rising, while feedstock costs remain relatively flat. In practical terms, US crackers are seeing margins expand simply by continuing to run.
A similar dynamic is emerging in Asia. Chinese propane dehydrogenation (PDH) units are already under pressure as propane supply tightens and LPG prices rise. But Chinese ethane crackers continue to receive steady inflows of US ethane and are largely insulated from disruptions in the Persian Gulf. That gives them a relative cost advantage as competing LPG-based units face tightening feedstock markets.
The shift is notable given the concerns in 2025 around restrictions on US ethane exports to China. Since then, China has reduced its reliance on LPG imports from the US while ethane shipments to Chinese crackers have continued to grow.
See East Daley Analytics’ NGL Hub Model for more detail. The broader lesson from the current disruption is that diversification matters. Petrochemical systems heavily exposed to oil-linked feedstocks are far more vulnerable to geopolitical shocks, while operators with access to alternative feedstocks and diversified supply chains are proving more resilient. In an increasingly volatile energy market, flexibility may matter just as much as cost. – Julian Renton.
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