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Crude oil demand from the petrochemical sector is projected to surge to approximately 17 percent by 2030, driven by continuous capacity additions across various countries and the rising consumption of downstream products, including plastics, in everyday life, according to the International Energy Agency (IEA), a Paris-based intergovernmental organization. The agency forecasts that crude oil demand from combustible fossil fuels—excluding petrochemical feedstocks and biofuels—could peak as early as 2027, even as jet fuel consumption continues to grow.
The IEA’s report, titled Oil 2025 – Analysis and Forecast to 2030, states: “With the petrochemical industry poised to become the dominant source of oil demand growth from 2026 onwards, the industry is on track to consume one in every six barrels of oil by 2030. Since petrochemicals are primarily produced from non-refined products such as NGLs (Natural Gas Liquids), these trends are set to increasingly impact the refining sector. The report forecasts that net refinery capacity will far exceed demand for refined products by 2030, likely leading to additional capacity shutdowns in the interim.”
Feedstocks- the backbone
The rising use of oil products as raw materials for plastics and synthetic fibers solidified petrochemicals' dominance in overall oil demand growth in 2024, accounting for about three-quarters of net growth. This trend is expected to continue through the remainder of the decade and beyond, with the share of petrochemical feedstocks in total oil consumption projected to increase from 15.8 percent in 2023 to 17.4 percent by 2030.
By the end of the forecast period, feedstock demand is anticipated to reach 18.4 million barrels per day (bpd), marking a 2.1 million bpd increase over 2024 levels. This growth is split between naphtha, expected to rise to 10.2 million bpd (approximately 1.1 million bpd higher than 2024), and liquefied petroleum gas (LPG) or ethane, forecasted at 8.2 million bpd (around 990,000 bpd above 2024 levels). The rapid expansion in LPG and ethane processing, particularly in the United States, has been supported by a burgeoning supply of natural gas liquids (NGLs).
Notably, the petrochemical sector has been the primary driver of demand growth over the past five years. Between 2019 and 2024, consumption of oil-based feedstocks increased by an estimated 2.3 million bpd, accounting for more than 95 percent of the net growth in overall oil demand. The share of petrochemicals in total oil use also rose significantly during the pandemic.
Underlying uses drive growth
The use of plastics and fibers in sectors such as packaging, manufactured goods, and construction is expected to rise steadily, particularly in emerging market countries. This growth is driven by trends like urbanization, increasing average incomes, and higher consumer spending. Additionally, the expansion of online delivery services and the emergence of new manufacturing industries, including clean energy technologies such as electric vehicles (EVs) and solar photovoltaic panels, are boosting feedstock requirements. Average annual oil consumption from the petrochemical sector is projected to grow by about 2.1 percent during 2024–2030.
According to the report, the dominance of petrochemical inputs in total oil demand growth does not stem from a sharp acceleration in polymer consumption. Instead, it reflects steady growth, contrasting with the structural slowdown occurring in key transportation sectors. Unlike transportation fuels, plastics consumption is not significantly affected by factors such as vehicle efficiency gains or widespread substitution effects akin to the electrification of transport.
While a faster increase in the use of recycled materials as substitutes for virgin polymers could reduce the link between rising demand from key applications—such as packaging, manufactured goods, and construction—and final oil demand, the impact is expected to be limited during the forecast period. Although plastic waste collection is improving in many countries, it is unlikely to substantially curb oil use before 2030.
Demand and capacity additions
The central role of petrochemicals in oil demand growth is mirrored by the significant contribution of China. A major wave of capacity additions, still ongoing, has led to a 2.2 million bpd increase in oil-derived feedstock intake for Chinese plants between 2019 and 2024. This rise, accounting for much of the global growth over the same period, resulted in a 15 percent (330,000 bpd) reduction in feedstock-equivalent petrochemical imports. China's new capacity includes a mix of refinery-integrated naphtha crackers, coastal propane dehydrogenation (PDH) plants, and steam crackers relying on imported natural gas liquid (NGL) feedstocks.
Consequently, the 2019–2024 feedstock demand growth has been distributed between naphtha (+1.3 million bpd) and liquefied petroleum gas (LPG)/ethane (+890,000 bpd). Naphtha crackers, which produce about one tonne of propylene for every two tonnes of ethylene, along with PDH plants focusing solely on propylene production, have significantly boosted China's petrochemical output. Over the five years to 2024, ethylene production increased by approximately 19 million tonnes per year (a 110 percent rise), while propylene output grew by about 17 million tonnes per year (a 130 percent rise).
In contrast, other recent capacity additions—such as those in the United States and the Middle East—have focused on leveraging local ethane supplies. Ethane cracking yields minimal propylene, providing naphtha crackers some competitive relief in international markets. However, China's sharply increased propylene output has become a major factor in reduced production in regions like Europe and the rest of East Asia. It has also supported higher run rates at export-oriented US ethane crackers, according to the IEA report.
Market movers
In addition to new capacity, changes in feedstock availability have significantly influenced patterns of petrochemical demand growth. The United States has seen the largest increase in NGL production in recent years, fueling substantial growth in US and Chinese petrochemical consumption of LPG and ethane. US ethane demand rose by 790,000 bpd between 2019 and 2024. This production not only supports rising domestic demand but also displaces other feedstocks and contributes to polymer exports.
Polymer and intermediate export shipments increased by 38 percent—equivalent to 350,000 bpd of ethane—between 2019 and 2024. Significant volumes were exported to Latin America, Europe, and various non-OECD Asian markets, including China. During the same period, US exports of ethane and LPG grew by 1.1 million bpd, reaching 2.6 million bpd, with nearly three-quarters of this increase directed to China.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
