High Current Crude Oil Prices Push Companies to Seek Petrochemical Alternatives

Following months of crude oil prices over $90 per barrel, companies are seeking to remove oil from their operations to the extent possible.  Soybean foam is being utilized by Ford Motor for its interior upholsteries. Paper cups, as replacement for polystyrene, are being tested by McDonald’s for its hot beverages because the material begins as petroleum. A manufacturer of cleaning products in California has started to remove diesel from its processes.

Energy consultant Daniel Yergin said the when oil prices were cheap, it was frequently used as an input to other final goods. Today, there are increasing efforts to get rid of oil and look for substitutes due to sustained high prices.

Despite dropping oil prices, with a recent decline to $83.04 a barrel, the Energy Department anticipates U.S. benchmark WTI crude prices to reach record high levels of more than $105 per barrel this 2012. Imports of U.S. oil based on Brent North Sea crude averaged to a crude oil price per barrel $117 throughout the year.

Bruce Bullock, Maguire Energy Institute’s executive director, said that when oil is the source of a company’s input goods, it causes a two-fold dilemma.

The American Chemistry Council said that the global chemical market’s annual worth is around $3 trillion. Its products accounts for 95% of total manufacturing processes. A majority of manufacturing activities entail petrochemicals, which makes up around 24% of crude oil utilized in the United States.

Analyst Douglas Smock said that many brand owners, especially those that heavily depend on packaging, would like to protect their costs in the long-term. He said that they want cost structures that are more predictable in the future. The high current crude oil price has led to the fast emergence of the interest in bioplastics, he added.

According to Ford, 5 million pounds worth of petroleum has been eliminated yearly by utilizing cushions that are soy-based throughout their North American fleet. Moreover, it said that it eliminated extra pounds of oil-based resins amounting to an annual total of 300,000 by producing kenaf-made door bolsters. Kenaf is a tropical plant from the family of cotton.