Global oil consumption declined by roughly 9% in 2020 as the pandemic reduced business and pleasure travel, factory production and transportation of goods. This abrupt drop accelerated an ongoing shift from fossil fuels to renewable energy.
U.S. government forecasts show that oil use for transportation, industry, construction, heating and electricity is declining and will continue to drop in the coming years. This trend has enormous implications for the oil industry: As the International Energy Agency observed in 2020, “No oil and gas company will be unaffected by clean energy transitions.”
Graphic showing products made from a barrel of oil.
About 80% of every barrel of oil refined in the U.S. today is used to make gasoline, distillate (diesel) and jet fuel, with the rest going into petrochemical products. EIA
Many of these companies are trying to make up losses by boosting production of petrochemicals derived from oil and natural gas. Today roughly 80% of every barrel of oil is used to make gasoline, diesel and jet fuel, with the rest going into petrochemical products. As demand for petroleum fuels gradually declines, the amount of oil used for that “other” share will grow.
This makes sense as a business strategy, but here’s the problem: Researchers are working to develop more sustainable replacements for petrochemical products, including bio-based plastics and specialty chemicals. However, petrochemicals can be manufactured at a fraction of the cost. As a biochemist working to develop environmentally benign versions of valuable chemicals, I’m concerned that without adequate support, pioneering green chemistry research will struggle to compete with fossil-based products.
This video from Austrian oil and gas company OMV shows how petrochemicals serve as building blocks for goods from pharmaceuticals to bike helmets.
Pivoting toward petrochemicals
Petrochemicals are used in millions of products, from plastics, detergents, shampoos and makeup to industrial solvents, lubricants, pharmaceuticals, fertilizer and carpeting. Over the next 20 years, oil company BP projects that this market will grow by 16% to 20%.
Oil companies are ramping up to increase petrochemical production. In the Saudi Arabian town of Yanbu, for example, two state-owned companies, Saudi Aramco and Sabic, are planning a new complex that will produce 9 million metric tons of petrochemicals each year, transforming Arabian light crude oil into lubricants, solvents and other products.
These changes are happening across the global industry. Several Chinese companies are constructing factories that will convert about 40% of their oil into chemicals such as p-Xylene, a building block for industrial chemicals. Exxon-Mobil began expanding research and development on petrochemicals as far back as 2014.