Here’s an interesting question: How might the political turmoil in the Middle East affect the global petrochemical industry?
Let’s look at the potential areas of impact:
Directly, the countries that have seen the most serious challenges to their ruling regimes—Egypt, Libya, Algeria, Tunisia, Yemen, And Bahrain—don’t have very large petrochemical industries, at least not in the sense that they are major producers of olefins and derivatives. However, they do have significant production of methane derivatives like nitrogen fertilizers and methanol. (Dow did once sign a preliminary agreement to modernize and expand a small Libyan petrochemical complex in 2007. But I haven’t heard company officials mention that project in a couple of years.)
The countries that do have large petrochemical industries—Saudi Arabia, Kuwait, the UAE, and Qatar—haven’t seen as much unrest, though they haven’t been completely immune to political protests. If these countries do see serious challenges to the regimes, then there could be a disruption in chemical operations.
Iran, which has had significant protests, is a separate question. Politics have already impacted its petrochemical industry in the form of sanctions over its nuclear program. This has been making it harder for Iranian firms to export chemicals.
Geographically, the countries that are major petrochemical producers sit on the Persian Gulf. In addition, Saudi Arabia has the major Red Sea port of Yanbu, which is also a major petrochemical center. The countries with the turmoil are mostly in North Africa. Most petrochemical exports are headed in the opposite direction, towards Asia. However, Oman, which sets right near the Strait of Hormuz, is experiencing major protests. Moreover, any disruption to the Suez Canal would also disrupt petrochemical exports to Europe. But if there was such a disruption, the world would have more important fish to fry than a few containers of polyethylene.
Oil prices always have the ability to disrupt the chemical industry. Brent crude prices have climbed since the turmoil began and have since hit $100 per barrel. That said, prices began the year in the mid 90s. The turmoil seems to be exacerbating an existing run up in prices. This will tend to make the natural gas based North American industry even more competitive versus the naphtha cracking rest of the world.
(It should be noted that Algeria is also a major player in the international natural gas market, and has pipelines that connect it directly with Europe.)
Finanlly, never underestimate the power of high oil prices to sabotage the economy. The last time oil prices climbed into the 90s was in the fourth quarter of 2007, when the recession began.
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