The Next Pillar Of Oil Demand Growth
The debate about peak oil demand always tends to focus on how quickly electric vehicles will replace the internal-combustion engine, especially as EV sales are accelerating. However, the petrochemical sector will be much more difficult to dislodge, and with alternatives far behind, petrochemicals will account for an increasing share of crude oil demand growth in the years ahead.
Petrochemicals don’t receive much attention in the media, but its fingerprints are everywhere. They are used in plastics, fertilizers, packaging, clothing, dyes, cleaning products, cosmetics, medicines, tires – a seemingly limitless number of end-uses. They are so ingrained and embedded into modern life that they are almost unnoticeable.
Producing the zillions of consumer and industrial products coming from petrochemicals requires huge volumes of feedstocks. Needless to say, as the name suggests, the feedstocks are derived from petroleum – oil and gas. Moreover, demand for petrochemicals is soaring, as hundreds of millions of people in emerging markets move into the middle class.
A new report from the International Energy Agency positions the petrochemical industry as one of the driving forces behind oil demand growth for the next few decades. “The growing role of petrochemicals is one of the key ‘blind spots’ in the global energy debate,” the IEA wrote. “The diversity and complexity of this sector means that petrochemicals receive less attention than other sectors, despite their rising importance.”
The IEA says that the petrochemical sector could account for more than a third of oil demand growth to 2030, and nearly half to 2050, “ahead of trucks, aviation and shipping.” Passenger vehicles are currently a major source of oil demand, but they will “diminish in importance thanks to a combination of better fuel economy, rising public transit, alternative fuels, and electrification.”
But petrochemicals are much more interwoven into modern life, and the alternatives are far less developed.
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