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Leery of future oil prices, companies explore alternative materials; Many industries rely on petroleum

Although oil prices have fallen recently, higher prices are inevitable, and many companies are trying to wring the oil out of their operations.

Ford Motor Co. is using soybean foam in its upholstery. McDonald's Corp. is testing paper cups for hot drinks in place of polystyrene containers, which start out as petroleum. Coca-Cola Co. and PepsiCo Inc. are becoming bioplastic bottlers. And a California cleaning products manufacturer has set out to eliminate diesel from its fleet.

"When oil was cheap, it became pervasive throughout our economy in hundreds and hundreds of invisible ways, as a raw material," said Daniel Yergin, an energy consultant who wrote a Pulitzer Prize-winning history of the oil industry. "Now there are accelerating efforts to squeeze oil out and find ways to substitute for it. That is the power of price."

The Energy Department expects U.S. benchmark West Texas Intermediate crude to set a record average above $105 a barrel in 2012. Prices have dropped dramatically in recent weeks, to as low as $83 a barrel, due to the economic slowdown. But as a necessary finite resource, prices ae sure to rise.

"When a company's raw materials come from oil, it's a double whammy," said Bruce Bullock, executive director of the Maguire Energy Institute at Southern Methodist University.

The global chemicals market is worth about $3 trillion annually, according to the American Chemistry Council. Its products can be found in 95 percent of all manufacturing processes. Much of it involves petrochemicals, which account for about 24 percent of the crude oil used in the United States, according to the Energy Department.

"A lot of brand owners, particularly those that rely heavily on packaging, are interested in protecting their long-term costs," said Douglas A. Smock, a plastics analyst who wrote a report for market research firm BCC Research that predicted a boom in plant-based bioplastics. "They want more predictable cost structures going forward. The volatile price of oil is responsible for the rapid emergence in interest in bioplastics."

Ford said it has eliminated 5 million pounds of petroleum annually by using soybean-based cushions in all of its North American vehicles. The company said it got rid of an additional 300,000 pounds of oil-based resins a year by making door bolsters out of kenaf, a tropical plant in the cotton family.

Smaller business are making big changes too.

BioSolar Inc. of Santa Clarita, Calif., dealt every day with the fact that solar modules are typically made with a glass front, an aluminum frame and a back sheet made out of a petroleum-based plastic or polymer.

"We saw where the price of petroleum was going," BioSolar Chief Executive David Lee said. "That was one of our motivations. We're not economists, but we knew that the price of oil was going to keep going up. The cost of photovoltaic cell manufacturing was going to skyrocket."

BioSolar has changed its process to instead use castor beans.

Saving money isn't the only motivation. Many businesses are responding to younger customers who are concerned about the environment.

"There is a strong generational interest in not using oil," said Amy Myers Jaffe, associate director of Rice University's Energy Program. "And that interest is more ideological than economic. These are people concerned about climate change and the social-justice issues of how the oil industry operates."