Oil demand for petrochemicals to decline in advanced world

Oil&Gas Materials 23 October 2020 10:25 (UTC +04:00)
Oil demand for petrochemicals to decline in advanced world

BAKU, Azerbaijan, Oct.23

By Leman Zeynalova – Trend:

Petrochemical demand will continue to rise in most emerging markets (Ems), in large part owing to rapid population growth, which should boost demand for plastics, Trend reports citing Capital Economics, UK-based research and consulting company.

“Use of oil-based fertiliser may also rise as farmers strive to raise yields, which are relatively low in EMs relative to advanced countries. However, we expect oil demand for petrochemicals to gradually decline over the coming decades in the advanced world. For one, the recycling of plastic is being heavily incentivised, and the EU plans to impose a ‘single-use plastic tax’. Details about this tax are scarce, but if it boosts the production of more recyclable plastic then it could be rolled out elsewhere and may even be extended to textiles too.

“More broadly, we think that efforts will be made to move away from oil-based petrochemicals. Initially, this may mean a switch to natural gas as a feedstock. But in the longer term, there is likely to be a switch to non fossil fuel-based plastics. They have already been developed, but are expensive. Technological advances should make them more price competitive over the coming decades. Accordingly, we expect petrochemical demand will only peak around the mid-2030s,” reads the report.

At a product level, Capital Economics project that fuel oil and gasoline will be among the first to face ‘peak’ demand, while petrochemicals (plastics) will take a little longer.

“Meanwhile, there appears little prospect of a shortage of oil in the medium-to-long term. The greater flexibility associated with shale production in the US means that the sort of imbalances that emerged in the oil market in the past are now much less likely. Furthermore, in a world of falling demand and real prices, it is likely that the low-cost producers, such as Saudi Arabia and Iraq, will be the last ones standing.”


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