Petrochemicals Now Drive 95% of Oil Demand Growth — What That Means for the Energy Transition Narrative

The role of petrochemicals in global oil demand is becoming increasingly difficult to overlook. Over the five years to 2024, petrochemical feedstocks accounted for roughly 95% of global oil-demand growth, according to the industry trend highlighted in the supplied context. The broader direction is consistent with IEA analysis showing that petrochemicals have become a major pillar of oil-demand growth as transport consumption increasingly faces pressure from electric vehicles, efficiency improvements and alternative fuels.

Transport Is Losing Its Traditional Position

For decades, cars, trucks and other transport applications were the central explanation for rising oil consumption. That relationship is changing. The IEA expects global road-fuel use to decline from 2025 as EV adoption and efficiency improvements reduce petroleum consumption in transportation. At the same time, petrochemical feedstocks such as naphtha, LPG and ethane are expected to remain important sources of oil demand growth.

China Is Central to the Shift

China is particularly important because its enormous petrochemical expansion has created substantial new demand for feedstocks. Between 2019 and 2024, China added ethylene and propylene production capacity on a scale roughly comparable with the existing capacity of Europe, Japan and South Korea combined. The IEA says China's petrochemical feedstock use increased sharply during this period, helping reshape global oil and chemical trade flows.

The Energy Transition Does Not Eliminate Oil Demand Equally

This creates an important distinction in the energy-transition debate. Electrifying transport can directly reduce gasoline and diesel consumption, but it does not eliminate the need for petroleum-derived materials used in plastics, packaging, synthetic fibres, chemicals, medical products and industrial goods. The IEA estimates that petrochemical feedstock demand will remain a major contributor to oil consumption even as overall demand approaches a plateau later this decade.

Decarbonization Strategy Will Need to Follow the Molecule

The shift means that decarbonization strategies focused primarily on road transport may miss an increasingly important part of the oil system. Cutting petroleum demand from vehicles can reduce fuel consumption, but petrochemical production requires a different set of solutions, including recycling, alternative feedstocks, bio-based materials, electrification of chemical processes and lower-carbon hydrogen. The challenge is especially complicated because petrochemical products can have long lifetimes and are often embedded in global manufacturing supply chains.

Petrochemicals Could Become Oil's Long-Term Anchor

The longer-term implication is that oil demand and the energy transition may increasingly become two different stories. Transport can decarbonize relatively quickly while petrochemical feedstock demand remains resilient. The IEA already expects total oil demand to level off around 106 million barrels per day toward the end of the decade, while petrochemical feedstocks remain a key source of consumption growth. For chemical companies, refiners and policymakers, the key question is therefore shifting from how quickly can oil demand fall? to how quickly can society reduce its dependence on oil-based materials?