SHILPYA KURNIASIH – 102319043
THE IMPACT OF COVID-19 ON THE PETROCHEMICAL INDUSTRY
IN UNITED STATES OF AMERICA (USA)
COVID-19 emerged in early 2019. This virus is spreading rapidly to various parts of
the world. A few activities carried out by the community were forced to be limited by the
government. Until the death case reached its peak by taking a high number of victims, most
countries in various parts of the world implemented lockdown. This pandemic is one of the
largest humanitarian and economic crises of our time, with nearly 200 countries affected.
Every aspect of society, including the energy industry and markets, is impacted by this
pandemic. Even so, the challenges facing the industry are not only economic but also in the
labor sector. The pandemic has impacted prices, demand, supply, investment, and several
other aspects of the energy sector, including the oil and gas industry. The pandemic caused
by COVID-19 forced the petrochemical industry players to rethink how this industry can
continue to survive and even increase. Slowing demand growth, rising surpluses, and
shrinking value pools predate the pandemic and are only becoming more apparent. Reporting
from the Gulf Petrochemicals and Chemicals Association (GPCA), said that overall, the
decline in petrochemical demand due to COVID-19 is currently estimated to average up to
10%. The situation is still dynamic, as most countries are moving from a "flattening" to a
"fighting" phase.
The pandemic poses a major challenge to the world's superpowers, namely the USA.
However, this powerhouse country is also experiencing a strong shock to the petrochemical
industry. The availability of sustainable refinery-based raw materials is one of the most
pressing issues because the refinery industry has previously experienced critical periods, in
which the closure of refineries was accelerated, which made the source of long-term supply
less sustainable. The article published by NCBI said that COVID-19 had an impact on the oil
and gas industry. The short-term impact is almost a 25% decrease in oil consumption, but it
slowly recovers to the previous number and even grows more. The long-term impact is a 30–
40% decrease in CAPEX and R&D investment in the oil and gas market, which is regional in
the United States, causing oil exploitation projects to decrease from more than 800 in 2019 to
265 in 2021. And this issue is predicted to increase. This issue reduces the competitiveness of
oil and gas against other energy operators, such as renewable energy, whose prices continue
to decline. While the decline in overall energy demand is simple and obvious, its impact is
complex across different types of energy and consumption patterns. The energy industry is on
a difficult journey to understand its impacts and identify emerging opportunities. It is
impossible to reduce crude oil production instantaneously. During a period of the sharp
decline in demand, a larger stock of oil will be formed, potentially lowering oil prices. Oil
storage capacity in certain areas is limited, and stocks should be moved to other places.
Many petrochemical producers, especially those in the mid-sized petrochemical
industry, are much better off by temporarily stopping production and fulfilling contracts to
take advantage of market access. Further emphasis was placed on the importance of market
access. Staying close to product buyers and the end industry behind them allows for quicker
recognition of changing demand patterns, upcoming challenges (such as logistical disruptions
or force majeure) and tracking price changes. The role of digital is also very important, by
providing buyers with tools for optimizing prices and access, especially in times of social
distancing. As this pandemic continues, there is a need to adapt to this new reality by
introducing advanced analytics that exists in the digital world to provide support or even
make decisions and digitize further commercial interactions on the channel. The application
of new work methods brings new requirements to the petrochemical industry, namely work
optimization and product improvement. The output is not just a solution to a problem, but
rather a total improvement. Therefore, a bright future awaits the application of this discipline
in the petrochemical industry. Petrochemical demand is expected to recover in 2021 as the
economy begins to reopen. Ethane, LPG, and naphtha together are estimated to account for
70% of the growth in demand for oil products by 2026.
Reference:
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(accessed on 5th March 2022 17.37 WIB)
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