Chemicals expected to account for almost 20% of oil demand in 2035
While increased efficiency standards and the rapid growth of EVs will reduce the growth rate for transport fuels, demand for feedstocks will continue to grow at strong rates. Demand for petrochemical feedstocks such as ethane, LPG, naphtha and synthesis gas goes beyond transportation — to the plastic, rubber and synthetic-fibre building blocks for products like shirts and consumer goods packaging. These items consistently have demand growth rates above GDP and will keep things running smoothly for the chemicals industry.
How are energy companies responding to declining oil demand? Many have begun to reevaluate their chemicals strategies. We're seeing major energy companies aggressively expanding their current chemicals portfolio, forming alliances with chemical companies, or stepping into the chemicals space for the first time.
As part of our coverage on peak oil demand, we asked Stephen Zinger, Senior Vice President – Chemicals and expert on the Wood Mackenzie Chemicals research team, to share his view on what will drive chemicals demand and how companies are responding to the likelihood of peak oil demand.
Will the chemicals industry shift focus to renewable sources?
As oil majors look to invest in petrochemicals as a growth driver of oil demand in the future, biochemicals and polyester recycling could squeeze this growth. Like any new technology, there are challenges to producing bioplastics at the same scale as traditional plastics. Provided these challenges can be overcome, we expect bioplastics to become a much larger portion of the supply — potentially eroding a portion of oil demand. At higher crude prices, the squeeze on oil demand will be even more significant. Some majors are already addressing this by getting involved with investments, consortium groups or funding technologies for developing biomass sourcing into either chemicals or plastics.
And what about polyester? Polyester sustainability is focussed on alternative routes via biomass or coal. The versatility and scalability of polyester means we expect demand growth to continue at 4-5% for the next five years, driven primarily by Asian fibre markets. Both cost and environmental benefits are urging producers and consumers to establish genuinely sustainable supply chain sourcing strategies and select suppliers who can deliver low carbon polyester products.
In our full peak oil demand series, we look more closely at the impacts on the upstream, supply chain, coal, metals, refining, gas, power and renewables industries and how companies will adapt. You can also read more about the impact electric vehicles will have on oil demand.
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