The energy shock is reshaping wood products costs: here’s what 2026 looks like 

Key takeaways: 

• The energy shock has disrupted 20% of global LNG supply and 15% of oil supply, putting cost and demand pressure on the North American wood products market. 

• Diesel prices rose sharply in early 2026, with the US average rising by more than 50%, squeezing logging, freight and manufacturing input costs. 

• Higher fuel costs have also triggered surcharges from mills and wholesalers, pressured resin and wax costs and disrupted freight on key global routes. 

• Higher energy prices reduce household spending power by weighing on discretionary income, including home purchases and repair and remodeling activity. 

Read our full analysis to understand how the energy shock is moving through the wood products supply chain and shaping the 2026 outlook. 

The North American wood products market entered 2026 carrying the weight of a difficult 2025. Weaker housing starts, modest repair and remodeling activity and declining furniture production kept demand under pressure across major product categories. Now, a new force is moving through the market: an energy shock tied to the Iran war. To understand why it matters, we need to compare where the market stood in 2025 with what the 2026 outlook now shows. 

From soft demand in 2025 to a cost-driven 2026 

In 2025, the story was largely about weak demand. While softwood lumber demand declined, other wood products also saw a downturn, including US hardwood lumber, OSB, plywood, particleboard, MDF, I-joists, and LVL. Pricing for softwood lumber was weak in the third and fourth quarters, because demand decreased in the second half of the year and inventory built up. 

Now firmly into 2026, demand pressure remains, but a major energy disruption sits at the center of the outlook. Approx 20% of global LNG supply and 15% of oil supply have been disrupted, representing what is the biggest energy supply shock in history. The result is a market dealing with both soft demand and rising input costs; a stagflationary shock. 

How the energy shock moves through the supply chain 

The effects are already visible across multiple stages of the wood products supply chain:

• Logging. Logging operations are feeling the squeeze from soaring fuel costs. We anticipate that a sharp rise in diesel prices in early 2026 could have a serious impact on logging activity in the coming quarters as consumer demand continues to be soft.
• Mills and wholesalers. Mills and wholesalers have introduced fuel surcharges to deal with the spike in fuel costs. These surcharges continue to challenge the middle part of the supply chain, with downstream users having little ability to absorb the cost increases. 
• Resin and wax costs. For panel producers, resin and wax costs are a source of further pressure. These petrochemical products account for anywhere between 10-35% of variable production costs for products like OSB, plywood, particleboard and MDF.  
• Freight. Shipping disruption is spreading from Europe to the Middle East, Africa and Asia as freight rates rise. That disruption creates additional uncertainty on key wood product trade routes. 
• Consumer spending. Higher energy prices act as a tax on consumers. They reduce household wealth and weigh on discretionary spending, including home purchases and repair and remodeling activity. The energy story is therefore both a cost issue and a demand issue. 

The key variables for a housing recovery 

Our analysis of the 2026 housing market suggests a potential recovery, but several challenges could stand in its way.  

Key variables, such as inflation and interest rates, will play a significant role. Uncertainty around these factors could influence Federal Reserve decisions, potentially keeping mortgage rates elevated. Additionally, we expect lower real disposable income, partly due to higher energy costs, to impact residential construction activity. 

Our forecast reflects this pressure on both new construction and remodeling projects, with the energy situation being a major influence on demand trends for 2026 and a potential rebound in 2027. 

So, why is this important for wood products? The sectors most crucial to this industry—housing, repair and remodeling, freight and logging—are very exposed to the unprecedented supply disruptions in energy markets, either through direct costs or the effect of higher energy costs on interest rates. While we don’t believe a recession is likely, discretionary and rate-sensitive parts of the economy that drive wood products demand remain vulnerable. 

What the market should watch next 

The most direct signal to monitor is the pace of inflation, which has spiked due to the current energy supply chain disruptions. The inflation picture influences interest rates, which are a key headwind on housing affordability and discretionary spending for home improvement. Both of these are key to driving wood product demand. The quicker this inflation shock is resolved, the quicker a more sustained rebound in wood products demand will be realized.  

Download our guide to the North American wood products market for a deeper dive into our specific projections, including how energy-linked pressures are shaping the market.