Naphtha Demand Modeling and Its Implications for Refining Configuration in the Era of Energy Transition

Bazyar, Afshar; Daneshi, Saeid

doi:10.22050/pbr.2026.570861.1427

Naphtha Demand Modeling and Its Implications for Refining Configuration in the Era of Energy Transition

Document Type : Original Article

Authors

Afshar Bazyar ¹

Saeid daneshi ²

¹ Assistant Professor, Faculty of Industrial Engineering, Malek-Ashtar University of Technology, Tehran, Iran

² Ph.D. Candidate in International Oil and Ga Contract Management, Faculty of Law and Political Science, Allameh Tabatabai University, Tehran, Iran

https://doi.org/10.22050/pbr.2026.570861.1427

Abstract

In the context of the energy transition and increasingly stringent climate policies, understanding oil demand requires a product-specific perspective that goes beyond aggregate indicators. This study examines naphtha, a key feedstock linking the refining and petrochemical sectors, and analyzes the factors associated with its demand across ten major oil-consuming countries during 2000–2024. Using long-term panel data, naphtha prices are first modeled as a function of crude oil prices through an ARMA specification, after which a naphtha demand equation is estimated with cross-section fixed effects and a lagged dependent variable. The results indicate that naphtha demand is significantly associated with economic growth and downstream petrochemical product prices, especially olefins and aromatics. The positive and statistically significant lagged demand term suggests persistence and gradual adjustment in consumption, consistent with structural inertia in petrochemical feedstock use. Overall, the findings suggest that the energy transition may reshape the composition of oil demand rather than lead to a uniform decline across all petroleum products. The results provide policy-relevant insights for product-specific energy-transition strategies, refinery reconfiguration, and refinery–petrochemical integration, while underscoring that the estimated relationships should be interpreted as conditional associations rather than causal effects.

Highlights

· Naphtha demand differs from transport-fuel demand during the energy transition, reflecting its role as a petrochemical feedstock.

· Economic growth and downstream petrochemical product prices are significantly associated with naphtha demand across major oil-consuming economies.

· The positive lagged demand term indicates persistence and gradual adjustment in naphtha consumption over time.

· The energy transition may shift the composition of oil demand toward non-fuel and industrial uses rather than uniformly reduce overall oil demand.

· The findings provide policy-relevant insights into refinery–petrochemical integration and product-specific energy-transition strategies.

Keywords

Energy transition

Naphtha demand

Refining configuration

Panel data econometrics

Value chain

Subjects

Oil and Gas Economics and Management

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