With green energy transition as its backdrop, the oil refining market is projected to accumulate noteworthy gains over the coming years. As the transformation of the global energy ecosystem progresses, the industry is expected to leave behind its key revenue generators, i.e., fossil fuels. Consequently, to sustain itself in a low-carbon world, the O&G sector is expected to turn towards the essential nature of advanced materials and define a new era for the oil refining industry.
For decades, the market has relied on the need to ‘burn’ fuel to bring in profits. However, with intensifying climate change concerns and the rollout of numerous strict emission regulations, the sector has started to turn a new page, wherein it would be relying upon the global need to ‘build’ from the petroleum-based products to generate profits, drastically changing the oil refining market outlook.
Meanwhile, the world’s post-pandemic economic recovery efforts are also expected to deliver numerous growth opportunities for the industry in the near-term.
According to a Global Market Insights Inc., report, the global oil refining market size is expected to surpass a valuation of $7 trillion by 2024.
New momentum from infrastructure development initiatives designed to kickstart economies
Construction activity is a major user of the globe’s fossil fuel resources, wherein the energy used in the production processes of buildings and building materials comes directly from the burning of oil and oil-based fuels. Whether it is to power heavy-duty construction equipment and vehicles or to keep the cement, rebar, and glass factories running, oil-based fossil fuels still see widescale adoption in the sector.
Over the past couple of years, the coronavirus crisis has significantly suppressed global economic activity, leaving one of the hardest impacts on the oil and gas sector. According to the International Transport Forum, the average global GDP contracted by as much as 4.5%.
To pull themselves out of the pandemic rut, several governments have been introducing infrastructure bills to kickstart their stagnant economies, fostering new opportunities for industry growth. As per the Organisation for Economic Co-operation and Development, the most immediate infrastructure investment related economic boost comes from construction spending, wherein every dollar spent leads to additional economic activity.
An instance of such construction spending can be seen in the Middle East, where the Kingdom of Saudi Arabia has commenced the construction of the massive $50 billion ‘Diriyah Gate’ project in 2020. Scheduled to be completed by 2024, the initiative is being marketed as a new cultural as well as lifestyle tourism destination in Diriyah, Riyadh, featuring entertainment, educational, cultural, hospitality, retail, office, and residential areas.
Consequently, despite a green energy transition that is in full swing, such construction projects are expected to drive oil refining activities across the globe.
Oil refining industry shifts from burning to building to foster new growth
With the introduction of numerous green building initiatives, the construction sector has been focusing on ensuring a lower carbon footprint for the structures it builds. According to the World Green Building Council, across developing nations, efficient buildings are being hailed as an investment opportunity that is worth approximately $24.7 trillion by 2030.
Looking at the bigger picture, the focus is not just on lowering carbon emissions caused by the actual construction activities, but also on making sure that the structure in itself is less carbon heavy. Legacy construction materials such as concrete, cement, steel, aluminum, and lumber are significantly carbon intensive, being responsible for a notable chunk of the global emissions.
This has sparked a global race for the advancement of more carbon-neutral construction materials among industry players, giving rise to a branch of petroleum hydrocarbon-based alternatives, which, in a majority of cases, offer superior characteristics while carrying a fraction of the legacy material’s carbon footprint.
For instance, cement, which is known to be responsible for more than 5% of the world’s overall carbon emissions, is already in line to be phased out. Novel polymer-and-sand based composites, which offer much faster curing times and enhanced stability, are currently being developed in the industry.
In effect, in an ironic twist, the demand for oil refining is expected to be held up by the world’s increasingly tightening green building regulations, with novel materials derived from crude oil and petrochemicals taking over niches currently held by legacy construction materials.
Elevated petroleum packaging demand from post-pandemic e-commerce boom
Looking back on 2020, tech industry experts have classified the period as a trigger point that sparked massive and long-lasting change. No other event has expedited growth on such an unprecedented scale in the digital as well as e-commerce sectors, both of which have been flourishing since the global health crisis began.
With global lockdowns restricting people’s movements, a strong uptake of e-commerce was witnessed among demographics and regions that were previously considered untapped. The United Nations Conference on Trade and Development cited the examples of two e-commence portals, Mercado Libre, and Jumia.
Mercado Libre is a Latin American online marketplace, which sold double the number of products per day in Q2 of 2020 than it did during the same period a year prior. Meanwhile, Jumia is an African e-commerce platform, which reported a jump 50% in transactions during the first two quarters of 2020.
This trend has caused packaging demand to skyrocket, allowing the global oil refining market to reap substantial benefits from the petrochemical-based packaging sector. With more individuals now preferring to do their shopping online than ever before, the petroleum-based packaging segment is expected to become a steady income generator for oil refining industry over the forecast timeframe.
Final thoughts:
All things considered, the oil refining market currently finds itself at crossroads. While it is bringing in profits from its usual avenues, it is also focusing on diversifying essential niches in a world that is actively working on phasing out some of these key growth providers. Consequently, it is safe to say that the market players would be facing profound challenges over the forthcoming years.
Source link – https://www.gminsights.com/industry-analysis/oil-refining-market