Material Insights · Understanding the Material World

Crude oil and Natural rubber

Synthetic rubber, made from oil and gas derived monomers, supplies just over half of the world's rubber, so crude oil sets the price of natural rubber's main alternative; but tyres need both, which keeps substitution limited and the price link partial.

Crude oil (energy) and Natural rubber (commodity): 3 relationships.

How they are linked

1. Oil sets synthetic rubber cost

Cost and price · Medium · Crude oil → synthetic rubber → natural rubber

Synthetic rubbers such as SBR are made from butadiene and styrene, which come from petroleum and natural gas, so oil prices move the cost of the competing product that tyre makers can blend with natural rubber.

  • 16.77 Mt synthetic rubber consumption expected in 2025 (IRSG, December 2025 outlook)
  • 15.73 Mt natural rubber consumption expected in 2025 (IRSG, December 2025 outlook)
  • about 48% natural rubber share of expected total rubber demand of 32.49 Mt, 2025

When oil is dear, synthetic rubber costs more and buyers lean towards natural rubber where specifications allow, which supports its price; cheap oil does the reverse. Natural rubber supply, though, depends on weather, land and labour in Southeast Asia, so the link can break when tapping or disease shocks dominate.

Sources: US Bureau of Labor Statistics, Beyond the Numbers; European Rubber Journal

2. Limited substitute in tyres

Substitution · Asymmetric · Synthetic can partly replace natural rubber

Natural rubber has strength and heat resistance that synthetics do not match in heavy tyres, while car tyres use more synthetic rubber, so tyre makers use both in fairly fixed proportions.

  • about 30% and 13% natural and synthetic rubber in a truck tyre (Australia, by weight)
  • about 16% and 30% natural and synthetic rubber in a car tyre (Australia, by weight)

The BLS describes the two as behaving more like complements than substitutes in tyres, with switching limited for technical reasons. Since more than half of all rubber goes into tyres, the room for oil prices to shift demand between them is narrower than the price link suggests, and it is smallest in truck tyres.

Sources: US Bureau of Labor Statistics, Beyond the Numbers; VicRoads, Victorian State Government

3. Price link: energy price link

Cost and price · Strong · Both ways

Oil sets the cost of synthetic rubber, and both respond to the same global cycle of vehicle use and industrial demand.

  • 0.42 monthly change correlation
  • 0.62 12-month change correlation
  • 0.72 fitted elasticity

Yearly moves correlate at 0.62, so oil price swings are a useful guide to the direction of rubber prices over a year. The correlation reflects a common driver as well as substitution, and it weakens when weather or disease cuts natural rubber output.

Sources: Material Insights (World Bank, FRED, IMF data)

For investors

Key learnings

  1. Crude oil prices feed into natural rubber through the cost of synthetic rubber, and yearly price moves correlate at 0.62.
  2. Substitution is limited because tyres need both kinds, with truck tyres about 30% natural rubber, so cheaper synthetic rubber does little to cap natural rubber prices during supply shocks.
  3. Natural rubber is just under half of world rubber demand, about 15.73 Mt of 32.49 Mt expected in 2025, so both supply chains matter to tyre makers' costs.

What to track

  • Brent crude and butadiene prices: Cost of synthetic rubber, the main alternative (Daily to weekly · ICE, petrochemical price assessments)
  • Natural rubber prices (SGX TSR20, Kottayam RSS4): Direction of tyre input costs (Daily · SGX, Rubber Board)
  • IRSG natural and synthetic rubber balance: Whether supply or demand is driving the price (Quarterly · IRSG)

For policymakers

Key learnings

  1. India consumed 14.10 lakh tonnes of natural rubber in 2024-25 but produced 8.75 lakh tonnes, a gap of about 5.35 lakh tonnes.
  2. High oil prices raise synthetic rubber costs and support natural rubber growers' prices, but hurt tyre makers that need both.
  3. Planting in the North East with tyre makers, 150,915 ha of a 200,000 ha target, is one of India's main levers to narrow the natural rubber gap.

What to track

  • Natural rubber production, consumption and imports: Size of India's supply gap (Monthly · Rubber Board)
  • North East planting progress: Future domestic supply from new plantations (Annual · Rubber Board and Ministry of Commerce)

India

India consumed 14.10 lakh tonnes of natural rubber in 2024-25 against output of 8.75 lakh tonnes; a programme with tyre makers had planted 150,915 ha of a planned 200,000 ha in the North East.

Sources

  1. Why the prices of natural and synthetic rubber do not always bounce together, US Bureau of Labor Statistics, Beyond the Numbers (2020)
  2. IRSG expects 12% growth in rubber demand to 2032, European Rubber Journal (2026)
  3. Technical Report TR 216: Literature review on the use of passenger vehicle tyres in bitumen, VicRoads, Victorian State Government (2019)
  4. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  5. Lok Sabha unstarred question 2649: natural rubber, Ministry of Commerce and Industry, Government of India (2025)