We all know that the price of most commodities goes up whenever the price of Petroleum goes up. But there are some commodities that have a direct correlation with the price of Oil. One of these is rubber. You might ask why rubber? It’s because there are two common types of rubber available in the Market; Natural Rubber which comes from the Rubber Tree, or genus Hevea. And then we have Synthetic Rubber, which comes from (you guessed it) Oil and Natural Gas.
Before Synthetic rubber was cheaper to produce than Natural Rubber hence it’s preferential use. But now with the high price of Oil, the price of Natural Rubber became more favorable since manufacturers are looking to Natural Rubber, over Synthetic Rubber, to lower their cost of production. The high demand and low supply (who wanted to go into rubber tree farming if the price wasn’t good?) in turn also jacked up the price of Natural Rubber.
The graph below correlates world oil prices versus historical Natural rubber prices in the Philippines. You’ll see a very good and almost tight correlation.
Source: Historic Crude Oil Data and Bureau of Agrarian Statistics (Philippines)
Some people are attributing the rise of Oil and Rubber prices to the preparation of China for the 2008 Olympics as well as the rapid industrialization of China, India and Brazil. And as soon as 2008 is over or one of those 3 economies cools down so will the price of Oil and Rubber. But if you think about it, there’s still going to be a whole lot of cars running on those newly built roads in China that are going to be needing rubber tires and fuel on a yearly basis. So my safest assumption would be that Oil Prices might cool off in 2008 but I don’t think we’re going to be seeing $20/barrel prices either.
Category: Oil
April 1st, 2007 at 12:07 am
Which is better to plant if i want to earn more? rubber or jathropa/tuba2x or Mango?
April 3rd, 2007 at 3:23 am
Hi Yari… that’s a tricky question…if you have high yielding soil, why plant jatropha? when you can earn more from high yielding crops… especially since the buying price of jatropha is yet to be established without a processing plant… rubber is good now, but it takes about 5 years before you can harvest the latex so there’s no telling how much it will be by that time. Not to mention that you have to have a latex buying station nearby else you’ll have no market for your produce… you might want to study what the available markets are for your potential produce before you start planting… that great thing about jatropha is that you can start harvesting after just 6 months… yield are low however