Petrochemicals to drive world oil demand

Petrochemicals are set to be the largest driver of world oil demand, outpacing cars, trucks and aviation in future oil demand growth, even with ambitious efforts to promote recycling and promote greater efficiency, according to the latest analysis from the International Energy Agency (IEA).

Petrochemicals are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7mn b/d of oil by then. They are also poised to consume an additional 56bn cm of natural gas by 2030, and 83bn cm by 2050.

The Future of Petrochemicals report is part of a new IEA series shining a light on ‘blind spots’ of the global energy system. Petrochemicals are particularly important given how prevalent they are in everyday products, such as plastics, fertilisers, packaging, clothing, digital devices, medical equipment, detergents and tyres. They are also required to manufacture many parts of the modern energy system, including solar panels, wind turbines, batteries, thermal insulation and electric vehicles.

Demand for plastics – the key driver for petrochemicals from an energy perspective – has outpaced all other bulk materials (such as steel, aluminium, or cement), nearly doubling since 2000. Advanced economies currently use up to 20 times more plastic and up to 10 times more fertiliser than developing economies on a per capita basis, underscoring the huge potential for global growth.

The dynamism of the petrochemical industry is also driving new trends around the world. After decades of stagnation and decline, the US has re-emerged as a low-cost location for chemicals production thanks to the shale gas revolution, and is now home to around 40% of the global ethane-based petrochemical production capacity. Meanwhile, the Middle East remains the lowest cost centre for many key petrochemicals, with a host of new projects announced across the region.

Petrochemical products provide substantial benefits to society, including a growing number of applications in various cutting-edge, clean technologies critical to sustainable energy systems. However, the production, use and disposal of petrochemical-derived products present a variety of climate, air quality and water pollution challenges that need to be addressed. While substantial increases in recycling and efforts to curb single-use plastics are underway, especially in Europe, Japan and Korea, the impact these efforts can have on demand for petrochemicals is far outweighed by sharply increasing plastic consumption in emerging economies.

To address these challenges, the report outlines a clean technology scenario (CTS), which provides an alternative future in line with key UN sustainable development goals, such as climate action, responsible consumption and life below water, among others. The scenario outlines an ambitious but achievable pathway to reduce the environmental impacts of petrochemicals, under which air pollutants from primary chemicals production decline by almost 90% by 2050, direct carbon dioxide (CO₂) emissions reduce by nearly 60% and water demand is nearly 30% lower than in the base scenario. It also emphasises waste management improvements to rapidly increase recycling, thereby laying the groundwork to more than halve cumulative, ocean-bound, plastic waste by 2050.

In the CTS, petrochemicals become the only growing segment of global oil demand. Despite near-tripling in plastic waste collection by 2050, the limited availability of cost-effective substitutes for oil feedstock means that oil demand for petrochemicals remains resilient.

The IEA report also provides 10 key policy recommendations to build a more sustainable and efficient petrochemicals industry – five connected with ‘production’ and five with ‘use and disposal’:

Production

• Directly stimulate investment in research and development of sustainable chemical production routes and limit associated risks.
• Emission reductions targets, and incentivise adoption through fiscal incentives,
• Emissions.
• Require industry to meet stringent air quality standards.
• Fuel and feedstock prices should reflect actual market value.

Use and disposal

• Reduce reliance on single-use plastics other than for essential non-substitutable functions.
• Improve waste management practice, both to increase recycling and to drastically reduce plastic waste leakage.
• Raise consumer awareness about the multiple benefits of recycling consumer goods, the environmental ills associated with poor waste management, and the most effective policy interventions.
• Design products with disposal in mind by incentivising designers and manufacturers downstream of chemical producers to adopt designs that optimise the use of materials, enable reuse, and facilitate closed-loop recycling.
• Extend producer responsibility beyond production to appropriate aspects of the use and disposal of chemical products.

 
Figure 1: Plastics are a key driver of petrochemical demand – higher-income countries consume up to 20 times as much plastic per capita as lower-income economies, indicating significant global growth potential
Source: Future of Petrochemicals, IEA, 2018