Crude oil prices have been falling in 2015, but investments in the U.S. chemical industry have been rising. This is a result of increased capacity which is expected to reflect by the end of 2020.
In 2015 alone, the total value of investment projects is expected to exceed $145 billion. By the end of 2014 the total value of investment projects topped $136 billion. This information was reported by the ACC (American Chemistry Council).
Since feedstocks and gas prices are closely linked, the declining oil price is now a major concern for U.S. produces of chemicals like ethylene. There is substantial competition with bulk chemical producers in Europe and across Asia that use these oil-based feedstocks.
Declining crude oil prices have only reduced new investment plans for the U.S. as opposed to stopping them completely. The number of delayed projects account for barely 5% of total investments, but upwards of 12% in overall delayed projects are possible.
During the course of 2014, capital expenditure in the U.S. chemical industry spiked to $33.4 billion in 2014 – up 64% from 2010. By 2018 the capital expenditure in the U.S. chemicals industry is expected to reach $45.8 billion.
The U.S. has a definite advantage in terms of ethylene production capacity. The only concern is the cost involved in investing in greenfield sites. It is expected that the oil-to-gas price ratio will make the U.S. the ideal location for ethylene.