New US auto fuel standards provide chemical companies with major opportunities

Atlantic gasoline2015.jpg

The new US fuel economy standards announced today by President Obama are very big news for the chemical industry. By 2016, all new autos will have to meet a 39 miles/gallon standard, up 42% from the current 27.5 mpg. Trucks will have to do 30 mpg, versus 23 mpg today.

They are important for two main reasons:

Gasoline/naphtha balances. The chart above (from our major ‘Feedstocks for Profit’ Study last year), shows Europe heading for an enormous gasoline surplus by 2015. And it was already unlikely this could all be absorbed, as now, in the US market, due to increases in US refining capacity and the rise of ethanol.

The new standards will therefore add to the pressure on European refiners to institute closures, for the first time in many years. In the interim, they could well create a ‘disposal’ problem – opening up the opportunity for advantaged cost naphtha supplies into the hard-pressed European/US petchem industry.

Polymer demand. The new standards mean autos and trucks will have to be made of lighter-weight materials. Polymer manufacturers will have a golden opportunity to replace current metal and glass usage.

The new standards don’t begin to take effect until 2012, so won’t provide companies with much short-term help. But they do present some very interesting opportunities for those able to take a more medium-term view.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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