Oil firms gamble on plastic unlikely to be rewarded, report says
Updated: Nov 12, 2020
A report published on September 4th highlights the calculated gamble which the oil industry is taking by investing heavily in a growth in demand for plastics. As consumers eschew single-use plastic bags and governments step up the battle against plastic waste, major oil companies are planning to invest $400 billion in increasing the supply of virgin plastics over the next five years.
As the world moves further towards using renewables and clean energy and away from fossil fuels, the oil industry is pinning hopes that demand for fossil fuels to make the petrochemicals used in plastic will continue to increase. This is at odds with the conclusions of a report, The Future’s Not in Plastics, from the independent financial think-tank Carbon Tracker.
The Carbon Tracker report has based some of its findings on a report published in June by systems change service providers SYSTEMIQ entitled Breaking the Plastic Wave. SYSTEMIQ’s report stated that, unimpeded, the volume of plastic on the market would double and ocean plastic stocks quadruple by 2040. It called on governments, businesses, investors and consumers to collectively help break the wave of ocean plastic pollution.
Carbon Tracker have extrapolated the findings of Breaking the Plastic Wave and applied a microscopic analysis of the role of the oil industry in resisting efforts to stymie plastic production and, by implication, pollution. They question the validity of projections from the International Energy Agency (IEA) about future demand for petrochemicals.
The report maintains that the world is already moving away from a linear plastic system to a circular one. By committing huge investment based on increased demand for plastic which will not materialise, petrochemical companies will face huge overcapacity and left with stranded assets at a further cost to the environment.
Carbon Tracker posit the theory that global demand for oil has already peaked and the growth in demand for virgin plastics will decelerate from 4% to 1% annually. Kingsmill Bond, energy strategist at Carbon Tracker, said: “Remove the plastic pillar holding up the future of the oil industry and the whole narrative of rising oil demand collapses”.
Governments across China and Europe are introducing legislation with punitive penalties on unrecycled waste plastic strengthening the assertion of the Carbon Tracker report that investing in petrochemical companies now is a questionable strategy.