OIL ANALYSTS debate the future of transport fuels. That of petrochemicals—used to make everything from plastic packaging to paint—has seemed unequiv
OIL ANALYSTS debate the future of transport fuels. That of petrochemicals—used to make everything from plastic packaging to paint—has seemed unequivocally bright. The International Energy Agency (IEA), an industry forecaster, expects them to account for half the growth in oil demand from 2019 to 2025. Better yet, America’s shale boom has furnished cheap feedstock in the form of natural gas. ExxonMobil is spending $20bn on chemical and refining facilities along America’s Gulf Coast, near Texas’s Permian basin. Royal Dutch Shell is building a huge complex in Pennsylvania, atop the Marcellus shale formation—President Donald Trump has called it “one of the single biggest construction projects in the nation”. Saudi Aramco, the largest oil firm of all, this month completed its $69bn acquisition of a 70% stake in SABIC, Saudi Arabia’s chemicals giant.
Covid-19 would seem to validate such moves. Use of petrol, diesel and jet fuel has plunged amid lockdowns but plastic packaging and medical supplies are in high demand. However, diversification that makes sense for any individual firm may prove risky for the industry as a whole.
On paper, the allure of petrochemicals remains strong. If the internal-combustion engine falls out of favour, the thinking goes, even sanctimonious environmentalists will still purchase polyester camping tents and synthetic sandals. The market…