The world prices of crude oil and natural gas are some of the key economic drivers in plastics and resin manufacturing, not only in the U.S. but globally. Earlier this month, West Texas Intermediate (WTI) crude oil prices stayed above $54 dollars per barrel. The Henry Hub natural gas price inched to $3.01 on November 6 following a $2.68 - $2.94 (per million Btu) price range in the prior week. Predicting the energy price path, particularly with oil, will continue to be fraught with uncertainty. However, the latest report from the Organization of Petroleum Exporting Countries (OPEC) provides clues that the demand for and supply of energy will continue to grow.

OPEC estimates oil demand to increase to 102.3 million barrels per day (mb/d) from 95.4 mb/d—a 6.9 mb/d increase over 2016-2022, according to its recently released World Oil Outlook 2040. The developing countries are expected to generate strong demand for oil increasing from 43.2 mb/d last year to 49.6 mb/d in 2022. Over 2015-2040, global demand for energy is expected to rise by 35 percent over 2015-2040, according to OPEC.

Oil and gas are expected to continue to meet over 50 percent of the world’s energy needs by 2040. However, renewables—wind, photovoltaic, solar and geothermal energy—are projected to grow the fastest with an annual average growth rate of 6.8 percent. OPEC’s report also notes the increasing competition by way of incremental supplies from biofuels, natural gas liquids (NGLs) and other non-crude streams, leaving marginally under 85 percent, or around 0.95 mb/d p.a. on average, to come from crude-based refined products.

The largest source of global oil demand is the transportation sector, which OPEC estimates represents 45 percent of total demand at 42.8 mb/d. What’s interesting in the report for the plastics industry is that the petrochemical sector demand is expected to rise by 3.8 mb/d—the second-largest growth projection following the transportation sector. Currently, the U.S. plastics industry has a competitive edge on resin production due to its scale, infrastructure and low-cost materials. If demand in the petrochemical sector continues to increase, it is plausible to expect that a percentage of the demand will continue to feed into raw materials for the plastics industry—specifically polyethylene terephthalate (PET) which is derived from oil and natural gas.

Against a backdrop of growing demand for and supply of oil, gas, and renewables, and with the continued focus on light-weighting automobiles and other cutting edge technological innovation in the transportation sector, the demand for plastics parts and other components will continue to increase.