Digitization Big Data Instead of Cheap Oil: Digitization in the Age of Oil Market Fluctuations

Editor: Dominik Stephan

The chemical industry will have to get used to continuously strong oil price fluctuations. Companies that are agile enough to react to short-term, extreme market changes will be ahead of the competition in the future. Key is the digitization of the entire value chain.

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(Picture: WEG Wirtschaftsverband Erdöl- und Erdgasgewinnung e.V./Shawn Baldwin)

The experience from the past years shows that the oil price volatility will increase with shocks appearing more frequent and in a shorter period of time. „Volatility is the new normal in the chemical industry“, says Dr. Josef Packowski, Managing Partner at Camelot Management Consultants. Hardly ever before, the chemical industry had to face comparably significant changes. Especially new is the high rapidity of changes in supply and demand markets, customer needs and technologies. Correspondingly difficult is the challenge to adapt the global and already complex value chains in the chemical industry to these new developments.

Why Digitization is the new Feedstock

Digitization provides the technical foundations to generate and analyze relevant data along the value chain in real time. It also enables chemical companies in a further step to connect the individual areas of the value chain so that a flexible reaction to short-term changes is possible. „Digitization will become the critical competitive factor for chemical companies“, says Dr. Sven Mandewirth, Partner and Industry Lead Chemicals at Camelot.

The cheap oil prices have already taken their toll on chemicals and petrochemicals, putting projects in the billion dollar range at stake...

Challenging Times for the Gulf Region

Situation for Middle Eastern manufacturers is particularly critical. Bargaining from cheap sources in the region refineries are challenged by an increased self-sufficiency of Western markets and China’s demand slow-down. The beneficiaries of this development are predominantly US and Western European players, which are experiencing a revival of their already written-off capacities. A further critical dimension for Middle Eastern manufacturers is the lifting the sanctions on Iran which also are expected have a massive impact on the established players in Middle East.

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