Petrochemicals: The Driver of Growth

Formerly underdeveloped countries are increasingly industrialized. The middle class is rapidly growing in populous countries like China and India. And demand for everyday products made of plastics and petrochemical-derived fibers grows each day.

The International Energy Agency (IEA) asserts developed economies use 20 times more plastic than developing economies — a fact that has a far-reaching effect on demand for the petrochemical industry.

Petrochemicals: The Driver of Growth Oil Tanks Image

So, how will that affect the petrochemical market?

As a result of the shale gas boom, the petrochemical industry has seen a reversal of the cost associated with manufacturing in the U.S over the last decade. In fact, over 70 new projects have been greenlit in Texas and Louisiana alone since 2012.

But as the LNG industry begins to monopolize more of the available natural gas supply in the U.S., the spread between oil and gas prices is narrowing. It’s likely that demand for LNG will put cost constraints on natural gas feedstocks — ultimately driving the petrochemical industry to increase its reliance on oil as a feedstock.

In fact, IEA predicts that more than 30% of the increase in global oil demand through 2030 will be driven by petrochemicals and likely half of demand growth by 2050.

Petrochemicals: The Driver of Growth Pipelines Image

How should your company prepare for this changing petrochemical market?

In a recent article for Hydrocarbon Processing, Richard Murphy, ION Allegro’s product manager for petroleum, writes:

“To combat these unpredictable factors, petrochemical companies must have a game plan ready, one that includes gauging the amount of feedstocks to keep on hand, how to find alternate suppliers, and even alternative products that can be used in the interim if and when disaster strikes. Equally important is that market participants must have proper hedging and trading strategies in place to help them mitigate financial losses as outages or supply/demand imbalances prevent them from meeting contractual commitments.”

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Is your company prepared to adapt to the changes in the petrochemical industry?

Murphy notes:

“These realities have exposed a fatal weakness in the petrochemical industry: too many companies do not have the capabilities to manage their portfolios in real time or respond quickly when the market changes. The bottom line is that companies must proactively manage what is in their power to control, as well as develop a strategy to cope with fluctuations in price and product availability.”

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