Petroleum plays a huge role across industries, providing everything from fuel to construction materials to a wealth of acrylic products and more. While there is an increasing push from both governments and consumers towards renewable resources and sustainable business practices, demand for petroleum products and petrochemicals is expected to continue rising over the next few decades and petroleum will remain an important resource. A number of companies are therefore already working to improve efficiency and reduce their environmental impact, and more are expected to follow in the coming years.
Petroleum products are derived from crude oil and include materials such as asphalt, oil, grease, fuels, and petroleum jelly, briquettes, and waxes. The market for refined petroleum products was valued at over $600 billion in 2021 and is expected to be worth over $860 billion by 2028. The industrial sector is a significant consumer of petroleum products, with applications like road surfacing and machinery lubrication.
The industry took a very substantial hit during 2020 due to the COVID-19 pandemic, as industrial operations paused, people around the world quarantined, travel plans were canceled, and there was a sharp increase in the number of people working from home. Demand fell noticeably around the world as there was less call for fuel and for construction and industrial manufacturing materials. However, the market improved substantially in 2021 as projects and travel both resumed.
How Can the Petroleum Products Industry Exist Sustainably?
Despite working heavily with non-renewable resources, oil and gas companies have the potential to make big strides towards sustainability. With a major recovery and record profits after 2021, the oil and gas industry is in a position to invest in new initiatives that could make operations cleaner and less wasteful, or to increase investments in renewable energy projects. New sustainability policies from governments around the world provide additional incentives to put money towards these initiatives. In the long term, sustainable practices will be important to the survival of petroleum companies.
There are several different ways for companies in the industry to reduce their environmental impact.
Emission Reduction: Methane emissions are among the largest causes of global warming, and 15% of the world’s energy-related emissions come from oil and gas production. Minimizing gas flaring, CO2 venting, and methane leaks can substantially improve the industry’s environmental impact.
Carbon Capture Technology: Apart from reducing the amount of emissions created, carbon sequestration is another way of cutting down on emissions. Oil and gas companies are already responsible for a significant percentage of carbon capture facilities, and more investments and partnerships in that area could improve deployment worldwide.
Biofuel Investments: Low-carbon hydrogen, biomethane and advanced biofuels can provide energy without generating the same emission levels. Electricity, while a renewable energy source, cannot meet the world’s total energy demands on its own, especially as demand for energy continues to grow. Other energy sources like biofuel can help meet those needs while reducing the environmental impact of oil and gas.
Water conservation: Oil production consumes a substantial amount of water, especially during fracking — the oil and gas industry uses hundreds of millions of barrels of freshwater daily. While most of this water gets recycled, the industry is still working on ways to reduce water consumption and work towards 100% non-potable water use.
Improving Efficiency: Something applicable to companies across industries is finding ways of making resource usage more efficient. Technology like sensors, advanced analytics, and automation can improve accuracy and speed while reducing errors. By upgrading operational processes, companies can decrease the amount of bottlenecks, wastage, and accidents that occur on site, allowing them to do more with less.
Diversification: With record profits and a wealth of resources, now is a good opportunity for oil and gas companies to branch out into renewable energy sources. Solar and wind energy are popular investment opportunities, while some companies have moved into other areas of the supply chain, such as electricity distribution or electric vehicle batteries and chargers.
Currently, less than 1% of total capital expenditure by oil and gas companies goes towards investments outside of their core business areas, with leading companies spending roughly 5%. As sustainability becomes an increasingly high priority due to both the state of the environment and pressure from new policies around the world, diversification will become more and more important for businesses wanting to survive and prosper over the long term.