What else might drive up the price of oil?
Published 9:14 am Tuesday, September 23, 2008
Demand for oil is the major reason why gasoline costs so much. Countries such as China and India are industrializing, and they need oil to fuel their economies. Market speculation on oil futures also is driving gas prices up. Most everyone knows these factors by now.
But gasoline isn’t the only product made from oil. Many people forget that plastics are based on petroleum. Everything from movie film to drinking cups and from skateboard wheels to pop bottles are products derived from oil. So are fertilizers, pesticides, solvents and many cosmetics. Even aspirin, contact lenses and crayons are petroleum-based.
As a journalist, I’ve covered plenty of agriculture in my life. Ag organizations are always looking for additional products. You hear the term “value-added products” at the conventions all the time. If you are the soybean growers, you want more stuff made from soybeans so that the demand for soybeans goes up and, therefore, so does the price. The soybean organizations help fund research on new soybean products. Surely, the oil industry also funds research to find new products made from oil.
So considering so many things are made from petroleum, that makes me wonder: If we all reduced the amount of oil-based products in our lives, won’t that reduce the price of oil and, therefore, the price of gasoline?
Paper or plastic? Pick paper.
Glass or plastic? Go with glass.
Metal or plastic? Choose metal.
Would this approach bring down the price of oil?
I don’t know the answer. I’m only posing a question. I wonder why I haven’t heard it brought up in the incessant American national dialogue. Or what about the mainstream media? Maybe they are waiting for the New York Times, Wall Street Journal or Washington Post to do it first. Maybe at some point as prices go up the national discussion will be had, whether it is by big media or little bloggers.
I suppose if people all over the world somehow reduced the amount of oil-based products they used, then the oil cartel OPEC would merely reduce the amount of oil it sells to keep the prices elevated. If demand goes down, it can keep prices high by decreasing supply.
Of course, another answer could be that so much of crude oil is made into fuels that the other products don’t matter much. Let’s see.
According to the Energy Information Administration, the U.S. government’s official statistics on energy, finished motor gasoline accounted for 47 percent of petroleum products in 2006. Distillate fuel oil — which is heating oil and diesel fuel — accounted for 22 percent. Jet fuel was 8 percent. Petroleum coke is 5 percent. Still gas is 4 percent. Residential fuel oil is 3 percent. Asphalt and road oil is 3 percent. Liquefied refinery gases — propylene, ethane, ethylene, butane, butylene, isobutane, isobutylene — is 2 percent. Propane is 2 percent. Petrochemical feedstocks is 2 percent, and “other” is 2 percent.
But this doesn’t answer my question. How much of those products are not used for energy?
The Energy Information Administration says 18 percent of a typical barrel of oil is made into products such as plastics, synthetic rubbers and chemicals, and another 3 percent is made into asphalt items. Add the percentage points together, and my answer seems to be 21 percent of oil production goes to non-energy uses.
However, I have found other sources that put the figure at 16 percent or even 7 percent. I guess it depends on how they add things up.
Plastics are made from the liquefied refinery gases, such as propylene and ethylene. They are mixed with a catalyst and made into a snowlike-substance called fluff. Then the fluff is combined with additives and melted. Then it is cooled into pellets and shipped to customers. The customers manufacture the pellets into everyday things such as computer keyboards, wastebaskets and exit signs.
So what about those plastic grocery bags? They can be made from the oil byproduct ethylene. However, ethylene also is a byproduct of natural gas. So plastic bags can be made from crude oil or natural gas. It is stringed into polyethylene. That is made into chains to eventually form high-density polyethylene, or HDPE. You might have heard of that acronym before. Low-density polyethylene is used to make the sort of wispy, clear plastic bags you find in the produce aisle.
So would using fewer oil-based products reduce demand?
Probably a little. And that’s not a bad thing. What would really help is reducing the amount of gasoline we need, such things as buying hybrid or electric cars and getting around on passenger trains.
Goodness knows I use a ton of petroleum-based products. I have a 1 1/2-year-old son, and my wife and I buy disposable diapers all the time. Would I switch to cloth diapers just to reduce demand for this oil-based product? No. I am a junkie, and I am addicted to oil and oil-based products, just like everyone else in America is. My wife and I have two gasoline-powered automobiles, and we watch the gas prices closely, just like everyone else in America.
But maybe if the prices continue to climb and things get even harder, maybe we finally would switch to cloth diapers.
Maybe.
But probably not.
Tribune Managing Editor Tim Engstrom’s column appears every Tuesday.