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The soaring price of oil is hitting the chemical industry.
On August 29, energy futures resumed trading on the New York Mercantile Exchange following the impact of a hurricane. In the Asian session, October crude oil futures opened above $70 per barrel, reaching a record high of $70.80. Although prices slightly declined by the end of the day, they remained strong. On August 30, New York light sweet crude oil for October closed at $69.81, up $2.61 from the previous session. This surge in oil prices has created challenges for the chemical industry, which relies heavily on petroleum as a raw material, especially as downstream demand slows.
Last year, oil prices also spiked sharply. At that time, the petrochemical sector was in a peak phase of its cycle, with robust downstream demand. Companies managed to pass on rising costs to consumers, leading to even higher increases in chemical product prices. As a result, the industry benefited significantly from the oil price rise.
However, this year’s situation is different. The sharp increase in petrochemical prices last year led to a breakdown in the price transmission chain, and by April this year, the effects of the slowdown started to hit the chemical industry. Factors such as macroeconomic controls and reduced downstream demand have curbed consumption growth, making it harder for the sector to maintain profitability.
With oil prices now in a sustained upward trend, the petrochemical industry is no longer in a boom phase but rather on a downward trajectory. According to external analysis, the margin between petrochemical products and their raw materials in the U.S. has shrunk significantly since the start of the year. Additionally, global oil demand growth has dropped to its lowest level in three years, signaling a potential turning point in the industry.
Given these conditions, the chemical industry can no longer rely on cost increases driven by high oil prices to boost profits. Price competition is not a sustainable strategy, and aggressive moves to undercut competitors may lead to mutual losses. Instead, the industry should focus on natural market selection, where only the most efficient companies will survive.
To adapt, chemical companies must shift away from traditional, resource-intensive models. They should invest in technological innovation and improve management practices to reduce energy use and waste. At the same time, they should avoid reckless price wars and instead focus on long-term stability. Exploring alternative raw materials, such as coal-based chemicals or agricultural by-products, could open new opportunities. Technologies like methanol-to-olefins and bioethanol may become key growth areas in the coming years.
In short, the era of high oil prices is here, and the chemical industry must now prove its resilience through efficiency, innovation, and strategic adaptation.