Are Low Oil Prices Weighing Down Lightweighting?
One of the hottest topics in automotive lightweighting involves the impact of low oil prices. The main debate seems to be centered on the question of whether OEMs and suppliers will defer their development projects for lightweight enabling technologies and processes because of low oil prices. It may help to understand what is behind the oil price situation and define other critical influences on lightweighting development.
When petroleum prices were over $100/barrel, every automotive material supplier had developmental projects to create new, non-petroleum based lightweight enabling technologies. Today, oil prices are in the area of $30 a barrel. What is now the demand for those technologies? There are many technologies to consider, so let’s focus on the scenario of developing “renewable” products that reduce the demand for petroleum based raw materials. Renewable raw materials are considered to be based on either sustainable plant material or synthetics which can be recycled and reused with renewable based raw materials.
What’s behind the drop in oil prices?
Based on research done by the US Energy Information Administration and others, continuous increases in global liquids inventories have put significant downward pressure on oil prices since mid-2014. Global oil inventories have had two years of oversupply, and the first draw on those inventories may not occur until third quarter of 2017. For the foreseeable future, oil prices will continue to experience temporary periods of regional heightened volatility due to changing political environments in a dozen oil producing countries, economic cycles in consumer countries, and a vast infrastructure of pipes, ships, and refineries. All these factors are subject to produce unique events which have a high chance of significantly and temporarily affecting oil market pricing.
When will oil prices rise again?
Forecaster predictions have oil prices varying significantly from $56 to $79 per barrel by 2020, as compared to the recent $30/b pricing. While oil futures pricing currently predicts that pricing will average at the lower end, the potential for price volatility is nearly 100% of that range.
How will low oil prices impact vehicle lightweighting?
One way to consider this question is to ask whether the real market driver for vehicle lightweighting is raw material prices or CO2 emission regulations. While raw material prices are an important part of any technology solution to reduce CO2 emissions, increasing harmonious regulations (see chart below) are driving global OEM platform engineering changes with the threat of penalties for poor or non-performance. Various auto industry strategists have proposed that OEM vehicle platform mass reduction designs are now influenced strongly by global CO2 emission reduction harmonization. Therefore, such harmonization of those regulations will lead to mass customization of global vehicle programs & standards by OEMS, which leads to greater scale per unit for each global platform. The improved economy of scale then favors faster innovation of new materials and less repetitive engineering activity via common global material specifications, and ultimately a lower material cost per unit regardless of its origin (petroleum or renewable base).
Henkel has taken a long term and total solution cost perspective toward development of sustainable and renewable raw materials, regardless of the price volatility of petroleum based raw materials. As a result, Henkel Adhesive Technologies is developing sustainable solutions for automotive adhesives, sealants and functional coatings which enhance and enable lower environmental impact for manufacturers, including:
Regardless of oil prices, greenhouse gas emission regulations will continue to remain the key driver behind automotive lightweighting initiatives. To learn more, visit www.na.henkel-adhesives.com/lightenup.