Petrochemicals: A Sector in Secular Decline
As the economics of petrochemicals weaken, sustainable solutions are emerging.
Oil and gas companies are betting big on the continued importance of petrochemicals to our daily lives. In fact, the use of petrochemicals in the medical, aviation and industrial sectors is causing these companies to make shaky investments in new production facilities to meet a perceived future demand. Some policymakers are also looking to the industry as partners to build local economies.
Here’s what investors, decision makers, and community leaders need to consider when a company proposes to build a petrochemical plant in their community:
The proof is in the projects
Anyone betting on the future of the petrochemical industry should take a careful look at recent trends. The pace of project delays and cancellations across the U.S. make it clear: trouble lies ahead for new petrochemical facilities.
A growing consensus
State and local communities, intergovernmental organizations, and even credit agencies are all reaching a similar conclusion: the world doesn’t need more petrochemical products.
The future favors innovation
As the economics of petrochemicals weaken, a growing number of sustainable solutions are emerging. Innovative companies and industries are developing alternatives that eliminate or greatly reduce the need for polluting, fossil-based feedstocks.
Petrochemicals Updates
More and more analysts are agreeing with IEEFA's assessment that the petrochemical industry is overcapacity. A recent analysis states: The chemical industry is no stranger to overcapacity; however, it is presently facing a rather prolonged oversupply cycle, which has exacerbated critical challenges. Notably, the current overcapacity cycle is expected to last for several years, thus overlapping with some key timelines established for energy transition (ET) targets and mandates.
It is clear that producers and investors are seeing that change is needed in the petrochemical space to remain viable. It is time for the petrochemical industry to seriously look at sustainable alternatives and support a production cap.
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