UIC mulls impact of crude on France petchems

09 January 2008 17:58  [Source: ICIS news]

PARIS (ICIS news)--Higher oil prices should drive chemical product prices up in the first half of 2008, the UIC said on Wednesday, although the French chemicals trade group was quick to point out that this was this was not a forecast.

A $10/bbl increase in the oil price lifts costs globaly for the sector by €2bn ($3bn), it said. Higher priced oil had raised sector costs by €1.5bn in 2007 based on an average Brent crude price of $72.6/bbl.

Brent rose above $97/bbl in December 2007 and to $99.8/bbl in January 2008.

UIC said there is a regular "technical" lag of three to six months between a movement in the oil price and the average price of organic chemicals.

First half chemicals prices should increase, it said, but not in proportion to the price of oil as companies will let margins fall to retain market share.

The stronger relative value of the euro also tempers the impact of higher priced oil on production costs, the UIC added. This advantage is countered, however, by the negative impact on exports from the euro area.

The chemicals sector accounts for 41% of the oil products consumed by the French industry, the UIC said, a proportion that had remained stable since 2004.

Given the rising cost, industry is encouraged to examine alternative bio-based feedstock sources.

A plant chemical association (Association Chimie du Végétal) will be launched on 10 January to look at replacing chemical intermediates based on fossil fuels with bio-sourced products along the industrial chain, the UIC said.

($1 = €0.68)

By: Doris Leblond
+44 20 8652 3214

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