Saudi Aramco’s decision to invest in crude-oil-to-chemicals (COTC) refineries could signal a readjustment in the global oil market as the demand for petroleum-based fuels gradually falls.
What happens to an industry that can see a major source of its revenue drying up in the coming years? This is the challenge currently facing the global oil industry, which must move to diversify its refinery capabilities or face a slow, but terminal, decline.
As electric vehicle (EV) use continues to gather pace in many industrialized nations, oil majors can no longer rely on demand from the transportation industry as both diesel and petrol is replaced with batteries, biofuels and hydrogen.
According to the International Energy Agency (IEA), global road fuel use is set to start declining from 2025. As demand falls, total oil consumption by advanced economies is already nearly 10% below 2007 levels and shows no sign of recovering.
At the same time, oil use in China is expected to plateau before 2030, despite the Asian giant being the long-time driver of global demand; its economic growth is slowing, EV usage is growing, and infrastructure and heavy industry are becoming less of a priority.
The transport trend is a major factor behind the decline in oil demand. EVs and plug-in hybrids are now expected to cut gasoline and diesel consumption by the equivalent of 2.7 million barrels per day (mbbl/d) by 2050, or around 14% of US oil consumption, according to the Environmental Protection Agency.