Petrochemicals’ Oil Shock

Abstract

The oil price decline hasn’t quelled the U.S. petrochemical industry’s shale revolution; it has merely slowed the charge. U.S. producers still maintain a competitive edge over their foreign rivals. Profits have dropped from obscene to only very high. And although some companies talk about delaying multi-billion-dollar petrochemical projects, the next four years should still see more U.S. plants get built than in a generation. For the past five years, U.S. chemical companies have enjoyed an enormous advantage because of a glut of natural gas extracted from shale. Most U.S. petrochemical production uses gas-derived ethane, propane, and butane—known collectively as natural gas liquids—as feedstocks for cracker complexes that make the basic petrochemical building block ethylene. Competitors in Europe, Asia, and Latin America mostly crack petroleum-derived liquids such as naphtha. Hydraulic fracturing and horizontal drilling technologies have unlocked massive amounts of natural gas from the ground in the U.S.,...