The petrochemical industry has become the largest driver of world oil demand, overtaking other sectors like transportation and heating. As global economies expand and urbanize, the demand for petrochemicals, used in a myriad of products from plastics to fertilizers, has surged. This article explores the intricacies of the demand for petrochemical oil, the world’s largest consumers, and the relationship between the demand for world oil and the petrochemical sector.
Why the Oil Industry May Thrive Without Gasoline
While the shift towards electric vehicles (EVs) has raised concerns about the future of the oil industry, the demand for petrochemicals assures its continued relevance. The International Energy Agency (IEA) notes that petrochemicals are becoming a more significant factor in driving oil demand than the transportation sector. Products like plastics, and synthetic rubber, essential in various industries, ensure that oil remains a critical resource even as the world moves towards greener alternatives for energy.
What is the Demand for Petrochemical Oil?
Petrochemical oil is in high demand due to its versatility and essential role in manufacturing numerous everyday products. Petrochemicals go into the making of countless everyday items such as clothing, tyres, digital devices, packaging, fertilizers, and detergents. Petrochemical feedstocks constitute 12% of global oil demand, a proportion anticipated to grow due to the rising demand for plastics, fertilizers, and various other products.
For several years, leading energy organizations have been saying that petrochemicals will likely lead oil demand for decades to come due to the huge global reliance on products from these chemicals. For instance, by 2025, plastic production is expected to rise above 600 million metric tons a year, which will increase to around double this figure by 2050. Since the year 2000, more than half of all plastics ever produced have been manufactured, which has significantly led to a boost in oil demand.
Who is the Biggest Consumer and Driver of Demand for Oil Products?
With the rapid scaling of its petrochemical sector, China is currently the biggest consumer and driver of demand for oil products. As China’s petrochemical sector expands, demand for feedstocks derived from oil is shifting to the country from other longstanding petrochemical centers. It is also significantly affecting global markets for petrochemical products, such as plastics, synthetic fibers, and their intermediates.
China has long been the world’s largest polymer and synthetic fiber importer, accounting for the equivalent of almost 3 mb/d in feedstock terms, or 3% of global oil consumption, in 2019 and 2020. Now, its previous suppliers are under pressure after recent increases in Chinese production, particularly, during 2023. Petrochemical activity and associated oil demand decreased in other regions, particularly in the Middle East and the rest of Asia. During the first nine months of 2023, shipments of intermediate and final petrochemical products from these areas dropped by nearly 30% compared to the same period in 2019.
China’s rapid industrialization and urbanization have led to a massive increase in petrochemical production and consumption. The country is responsible for over a third of the world’s petrochemical demand growth.
What Percent of Oil is Used for Petrochemicals?
According to the IEA, approximately 12% of the world’s oil is used as feedstock for petrochemical production. This figure is expected to grow as demand for petrochemicals continues to rise. By 2030, Petrochemicals are set to account for more than a third of the growth in world oil demand and nearly half the growth by 2050, adding nearly 7 million barrels of oil per day. They are also poised to consume an additional 56 billion cubic metres (bcm) of natural gas by 2030, and 83 bcm by 2050, highlighting the sector’s growing importance in the global oil market .
World Oil Demand and Petrochemical Sector Contribution
In the short term, global oil demand is set to reach a level of 110.2 million barrels a day (mb/d) in 2028, representing an increase of 10.6 mb/d compared to 2022 with petrochemicals accounting for a substantial portion of this growth. In the long-term, global oil demand is expected to increase by more than 16 mb/d between 2022 and 2045, rising from 99.6 mb/d in 2022 to 116 mb/d in 2045.
Petrochemicals play a crucial role in driving the world’s oil demand due to their widespread use in everyday items. They are essential for producing components of modern energy infrastructure, such as solar panels, wind turbines, batteries, thermal insulation, and electric vehicles. IEA projects that petrochemicals will have a more significant impact on future oil demand than automobiles, trucks, and aviation.
Among the major influential petrochemical industry players in Egypt is Anchorage Investments led by Dr. Ahmed Moharram who stands out as a prominent figure in Egypt’s petrochemical landscape. Under his leadership, Anchorage Investment has been actively involved in expanding petrochemical projects, recognizing their potential to drive future oil demand. Among those influential projects is the Anchor Benitoite project located in the Suez Canal Economic Zone (SCZone). The project targets the production of various petrochemical products and is expected to achieve exports exceeding $1bn in its first year of operation.
In conclusion, petrochemicals are the largest driver of world oil demand, a trend that is expected to continue as the sector grows. The oil industry’s reliance on petrochemicals ensures its stability and relevance in a future increasingly dominated by alternative energy sources. Thus, focusing on petrochemicals is a strategic move that aligns with global demand patterns and offers significant growth opportunities for the oil sector.