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Petrochemicals set to be the largest oil demand driver – new IEA study finds

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 7 million barrels of oil a day by then. They are also poised to consume an additional 56 billion m3 (bcm) of natural gas by 2030, and 83 bcm by 2050, according to a major study by the International Energy Agency (IEA).

Petrochemicals – components derived from oil and gas that are used in all sorts of every day products such as plastics, fertilisers, packaging, clothing, digital devices, medical equipment, detergents and tyres – are becoming the largest drivers of global oil demand, ahead of cars, planes and trucks, according to a study by the International Energy Agency (graphic courtesy IEA).

The Future of Petrochemicals – towards more sustainable plastics and fertilisers” is part of a new IEA series shining a light on “blind spots” of the global energy system – issues that are critical to the evolution of the energy sector but that receive less attention than they deserve. Developed with input from governments, industry and other key stakeholders, the report is among the “most comprehensive” reviews of the global petrochemicals sector and seeks to bring the sector the attention it deserves in the global energy policy debate.

Petrochemical prevalence in everyday products

The report follows other reports in the series, including the impact of air conditioners on electricity demand, the impact of trucking on oil demand, or the role of modern bioenergy in the renewables sector and provides ten key policy recommendations to build a more sustainable and efficient petrochemicals industry.

Petrochemicals are particularly important given how prevalent they are in everyday products. They are also required to manufacture many parts of the modern energy system, including solar panels, wind turbines, batteries, thermal insulation, and electric vehicles (EV).

Our economies are heavily dependent on petrochemicals, but the sector receives far less attention than it deserves. Petrochemicals are one of the key blind spots in the global energy debate, especially given the influence they will exert on future energy trends. In fact, our analysis shows they will have a greater influence on the future of oil demand than cars, trucks, and aviation, said Dr Fatih Birol, Executive Director, IEA.

Plastics a key petrochemical driver

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. According to the report, 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 United States (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 percent 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, such as single-use plastics, 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 (SDGs), such as climate action, responsible consumption and life below water, among others.

An alternative industry with Clean Technology Scenario (CTS). Notes: All environmental impacts relate to primary chemical production (ethylene, propylene, benzene, toluene, mixed xylenes, methanol, and ammonia). Air pollution includes nitrous oxides (NOx), sulphur dioxide (SO2), and fine particulate matter (PM). Water pollution refers to ocean-bound plastic leakage. Carbon dioxide (CO2) refers to direct emissions from the chemical and petrochemical sector (graphic courtesy IEA).

The scenario provides an ambitious but achievable pathway to reduce the environmental impacts of petrochemicals: air pollutants from primary chemicals production decline by almost 90 percent by 2050; direct carbon dioxide (CO2) emissions reduced by nearly 60 percent; and water demand is nearly 30 percent 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 of waste plastic collection by 2050, the limited availability of cost-effective substitutes for oil feedstock means that oil demand for petrochemicals remains resilient.

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