Forget cars, plastics could soon become the 'single most important driver' of oil demand

Key Points
  • "When we look at the next 10 to 15 years, the single most important driver of global oil demand growth is petrochemicals," Fatih Birol, executive director at the IEA, told CNBC's "Street Signs" Monday.
  • Petrochemicals that are derived from oil and gas feedstocks form the building blocks for products that range from plastic bottles and beauty products to fertilisers and explosives.
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Petrochemical products like plastics will become the most prominent driver of oil demand over the coming years, the executive director of the International Energy Agency (IEA) told CNBC Monday.

"When we discuss oil demand, peak oil demand (and) oil market dynamics, the focus is solely on cars — which is completely wrong," Fatih Birol, executive director at the IEA, told CNBC's "Street Signs" Monday.

"When we look at the next 10 to 15 years, the single most important driver of global oil demand growth is petrochemicals," Birol said.

In a report published late last week, the IEA said it expects robust growth in emerging economies — such as India and China — to propel demand for plastics and other petrochemical products.

Meanwhile, oil demand for transport is projected to slow by 2050 because of the meteoric rise of electric vehicles and more efficient combustion engines, the IEA said.

The Paris-based agency added this would then be offset by rising demand in petrochemicals.

Explosive demand

Petrochemicals that are derived from oil and gas feed-stocks form the building blocks for products that range from plastic bottles and beauty products to fertilizers and explosives.

Oil companies such as Exxon Mobil and Royal Dutch Shell both plan to invest in new petrochemical plants over the coming decades, betting on the explosive demand for plastics in emerging economies.

"Of course the measures to make (petrochemicals) sustainable can dent this growth but we have no doubt whatsoever that petrochemicals will be the single most important driver of oil demand for many years to come," Birol added.

 sezer66 | Getty Images

The IEA's forecast comes despite government efforts to dramatically reduce pollution and carbon emissions from oil and gas in recent years.

The mass use of plastics in countries across the world has come under intense scrutiny in recent years, as waste makes its way into the oceans where it harms marine life. Several nations have since acted to ban, partly ban or tax single-use plastic bags.

— Reuters contributed to this report.