Fuel Fed Inflation on Paint and Blast Shops

“$1,055 – people need to pay attention”.

I heard the pronouncement this morning on the radio as I was getting ready to go to work – about to climb into my pickup & thereby consume some fossil fuel myself along the way.  The date was March 11, 2022.  The quote was from an over the road Truck Driver.

A few months ago in 2021, the average price for Diesel was $3.15/gal.  Today Diesel consumers are paying $5.20/gal or more – a whopping 65% increase in less than 6 months!  Back in October of 2021, the same Truck Driver was paying $639 for the 205 gallon fill-up that cost him $1,055 today.

Unfortunately, the 65% increase in fuel costs tentacles into everything we consume – from groceries, utilities, home prices, construction costs, cleaning supplies, clothing, paint, electrical, lumber and so many other consumables.

According to the Labor Department report released March 11, 2022, the average household is spending $300 more per month to cover the 8% February Consumer Price spike.  I suspect that may be too conservative an estimate of the actual cost-of-living increases.

If we focus on just Paint, the inflationary cost increases are well into double digits.  For example, we are right now paying a full 50% more for a particular Alkyd Gloss Industrial Enamel – compared to 8 months ago.

Other generic paint types are right there with Alkyds – including Epoxies, Urethanes and even
Acrylics.  Our industry wishes the increases were only 8% – but multiple events have conspired to increase paint costs.

As mentioned, freight costs are one of the factors impacting paint costs.  Paint is made of several different ingredients – sometimes 15 to 20 distinct raw materials – all are collected (i.e., shipped into the plant) and blended at the Paint Manufacturing facility.  Inbound freight cost increases have contributed to higher prices for Paints as some raw materials have to be shipped from multiple location such as distant port cities, or even from overseas.

Paints and Coatings are made up of organic and to a lesser extent inorganic components.  The organic portion includes resins, solvents, extenders and some pigments or fillers.  All of these organic components are downstream petroleum products – in other words, all are directly tied to Crude Oil – or more specifically refined crude oil products.

And, the organic portion of Paint chemistry is not only the largest volume in the Paint can, it is by far the most expensive components – as much as 70 to 90% of the cost of Paint is actually petrochemical refinements.  So crude oil pricing – and more importantly the downstream refinements, largely determine the cost of Paints.

Crude oil averaged about $68 per barrel in 2021.  Today it is listed at around $110 per barrel depending on the day – approaching double the 2021 average price.

In addition to the increased cost of freight and Paint components, Paint Manufacturers are energy intensive facilities.  They require very significant amount of energy to produce finished Paint Products.

Critical functions that require energy in the Paint Plant include:

1. Mixing and Blending in large vats
2. Pumping
3. Heating
4. Cooling
5. Cleaning of tanks
6. Scrubbers (air borne emissions)
7. Dust Collectors
8. Hazardous Waste storage and disposal
9. Dry material handling
10. Wet, viscous material handling
11. Can filling
12. Labeling
13. Filling of cartons
14. Palletizing & Shrink-wrapping
15. Storing and movement of raw materials
16. Storing and movement of finished paints
17. Fork lifts, trucks, rail and overseas container movements and shipments

Energy cost increases help fuel (no pun intended) the Paint cost increases in all aspects of the manufacturing process.

Additionally, raw material and finished good supplies are well below demand.  Covid caused many producers to scale back.  Once the pandemic eased, demand jumped back and caught the supply side well short of satisfying orders.  Still well short today.

In fact, in the Paint and Coatings world, backorders are the norm.  Switching from one Paint to another from a supplier, or switching suppliers, or revamping the entire paint specification are all to be expected in today’s Paint Shop.

For some examples, we have been waiting for over 3 months for Coal Tar Epoxy – from anyone.  A Clear 2-component Polyurethane has been backordered for over 8 months – from anyone.  Striping Paint (inverted Spray Cans) are not currently available in the yellow.

Interior latex paint is totally inconsistent in supply – most Paint manufacturers will tell you they do not have a date certain when this can be supplied (in the Contractor Grade material).

These are just some personal anecdotes – but the corporate buyers relate the same horror stories.  And when some needed Paint or Coating is available, expect to pay 20, 30 to 50% more than 8 months ago.

The cherry on top is that everyone is experiencing labor shortages.  Labor costs are rapidly increasing in order to attract workers.  Not sure what the unemployed – or age eligible non-workers – are doing to exist, but the Trade industry and manufacturing sectors are not highly sought-after positions right now.

In our opinion, we need to bring back domestic oil production / exploration along with pipeline approvals in order to secure the lowest cost of petrochemicals – and become energy independent from foreign (unreliable) sources.

At the same time, continuing to develop green energy sources for the marketplace will help lower their costs and make them more economically competitive with fossil fuels.  And, allow time to develop other more environmentally friendly energy sources.

In conclusion, it is evident that “people are paying attention”.  Fuel costs will take some time to moderate as we will continue to require fossil fuels to energize our economy – green energy policies need to be moderated for longer term conversion while allowing technologies to develop and ultimately replace fossil fuels to some extent.  Moderation of energy policies to resume fossil fuel development is unlikely to occur under the current Administration unfortunately.

Inflation is not transitory – so expect $1055 fill-ups for truck drivers will likely continue to rise – as will the cost of doing business and the cost of living.

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