Low oil prices could erode U.S. petrochemical producers’ edge over foreign rivals. The recent plunge in world crude oil prices could cause U.S. petrochemical producers to lose their edge over foreign competitors, according to a note from ICIS.
The business information service said that U.S. operators had reason to fear bearish oil markets because they make extensive use of natural gas liquids (NGLs) in polyethylene production. These feedstocks are relatively cheap, since they have their origin in the vast amounts of associated gas removed from unconventional oil fields, but supplies will diminish if low prices discourage oil producers working in shale basins, it explained.
At the same time, it said, low crude prices will benefit petrochemical producers outside of the United States. Most non-U.S. operators rely heavily on naphtha derived from petroleum, so their feedstock costs are set to drop along with the oil market.
Kevin Swift, the chief economist of the American Chemistry Council (ACC), commented: “All things being equal, this [price plunge] would tend to diminish [the] competitiveness of U.S.-based petrochemicals, but it also depends on by-product values from cracking naphtha.”