Petrochemicals. It's a mammoth industry - $80 billion a year in sales, larger than steel. It employs 300,000 Americans. And today it faces an uncertain future.
The reason: foreign competition. The competition is growing, and it threatens big United States chemical companies with a wave of red ink that could wash right through most of the 1980s.
Worried by the outlook, US officials have compiled a 250-page study that tries to chart the industry's prospects over the next 20 years.
In recent months, Commerce Department officials have been privately briefing officers of top US chemical and petroleum producers, warning that the prospects aren't bright and that there is very little the government can do to help.
Behind the gloomy outlook is the high price of petroleum and natural gas, the raw materials for the petrochemical industry.
The industry makes solvents, fuels, and plastics - products such as methanol, ethylene, propylene, benzene, and polyethylene. On average, its raw materials, or feedstocks, account for about 50 percent of the cost of running a petrochemical plant. Natural gas and oil prices in the United States have risen sharply since the early 1970s, and have driven up the operating costs of American, European, and Japanese petrochemical plants.
In Saudi Arabia, Kuwait, Mexico, and a number of other countries, however, vast quantities of natural gas are flared, simply burned off as a byproduct of pumping oil. In Saudi Arabia alone, 1.4 trillion cubic feet of gas were burned off in 1981.
Several of these countries are building modern petrochemical plants that can tap this virtually free source of gas. They are determined to push their way into this market and eventually dominate it, for economic and nationalistic reasons, US officials say.
What does this mean for American production plants?
''There is no way we can be competitive in these industries,'' says a top US official, who asked that his name not be used. ''We are going to lose these plants. The only question is, how fast?''
These views have been passed along to industry leaders in hopes that business can take steps to prevent a serious loss of US jobs.
It has been ''fascinating,'' says one government official, to see the reaction of businessmen, particularly those who were not aware of the seriousness of the situation. The business leaders seem to go through four phases, he says: ''Skepticism, agitation, anger - 'But the government can't allow this!' - depression.''
While the outlook is very serious, the US, Europe, and Japan - where most plants are now located - have a number of options.
One is to collaborate with countries that have cheap petroleum. US and other Western companies can enter joint marketing agreements, help produce petrochemicals, and assist with technical research and planning. Some firms are already doing this.
More important for those concerned about US jobs is research and development on new, more sophisticated products.
Most of the petrochemical industry today is a commodity-type business. It consists of high-volume, low-profit products that are essentially the same no matter what company or country produces them. The key factor is price.
There is a high-profit sector emerging in specialty chemicals. These are currently low-volume products. But as costs come down and new uses are found, they could become major factors in the marketplace.
The Commerce Department study, entitled ''A Competitive Assessment of the US Petrochemical Industry,'' says products like specialty chemicals could go a long way toward maintaining jobs in US companies.
Specialty chemicals in particular are more labor-intensive than other parts of the petrochemical industry. These would provide a natural transition for workers now in the commodity end of the business, where workers are highly skilled and mobile.
US firms, however, will have to move deftly. European and Japanese companies are under even more pressure to develop new products because the cost of their feedstocks is higher than for those in the US.
Much of the impact of new foreign competition will be felt in the Sunbelt states, particularly Louisiana and Texas, where the bulk of US production is.
While Saudi Arabia and others are moving steadily toward greater production capacity, they could be slowed by several factors.
The cost of building a petrochemical plant in some countries, such as Saudi Arabia, is proving to be almost twice as high as in the US. Other potential competitors, such as Mexico, are having financial problems that could delay their expansion. The falling price of oil also reduces the capital available for these countries. Mexico and Indonesia, among others, have large internal needs for petrochemicals. Their entry into international markets could be slowed as they meet domestic demand.
Also, petrochemical plants take five to seven years to build. That stretches the time US companies will have to adapt.
US petrochemical makers, which include both chemical and petroleum companies, operated at only 60 to 65 percent of capacity during the recent recession. Far higher rates are needed for profitability. The outlook now is that capacity will far exceed demand, even on optimistic projections, beyond 1990.