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Saturday, 30 May 2020

Why a low oil price is bad for the coatings industry

Monday, 8 August 2016 | Posted by: Jan Gesthuizen, European Coatings Journal

The price of oil has just hit a new low – in the US you can get a barrel for under $40. At first sight, this might seem to be a good thing for the coatings industry, because it lowers the prices of raw materials. In the long term, though, it might not prove so beneficial.

A few months ago, the VDL (German Association of the Coatings Industry) argued that the effect of the low oil price should not be over-rated because the crude oil price wasn’t replicated along the entire value chain. Furthermore, not all coatings ingredients, e.g. numerous pigments and fillers, were based on oil, it said.

The oil price will rise eventually

Wood as a resource for coating chemistry

Renewable Resources like wood will have to reduce fossil resources. (Source: Fotolia)

However, the low oil price does have an effect and it must be remembered that it won’t stay this low for ever. Even if the effect isn’t as great as expected, it is still substantial. The price will probably stay down for a year or two. But who can say with absolute certainty that it will still be low in five years’ time?

Far too much of the world’s oil reserves are located in politically unstable regions, such as the Middle East. Also, governments will have to do more to reduce usage of fossil fuels. This could be achieved through prohibitions, taxes or other measures. Ultimately, that is not really important. Rather, if the Paris Climate Agreement is to mean anything, sooner or later we will have to eliminate oil-based coatings as much as possible.

Learning today, benefiting tomorrow

This transition will have winners and losers, with the early adapters probably on the winning side. While it is true that, at the moment, bio-based coatings are premium products aimed at a certain class of customer, such as LOHAS (Lifestyles of Health and Sustainability), this will eventually have to change. You need only look at solar energy, for example, to see how this might come to pass. Ten years ago, only a handful of people had solar panels installed on their roofs. Now, solar panels are virtually commodity products in many countries and available to everyone.

A look at the energy sector also shows what happens to those who are unwilling to go green. Many of the old utilities are struggling and quite a lot of them will eventually vanish.

FYI: If you want to learn more about renewable and bio-based materials for coating systems our seminar "Bio-based raw materials" should be of interest for you. Just check it out!

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