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The Future of Plastics Will Determine the Future of Oil Demand

The UN is this week discussing the future of plastic—or so it would seem on the surface. The UN Global Plastics Treaty negotiations aim to curb plastic pollution by essentially curbing the use of plastics globally. And they look set to fail.
The goal is certainly noble. Reducing the massive amount of plastic waste that we produce on a daily basis to keep it from ending up in rivers, oceans and, according to some researchers, our bodies. Achieving this goal, however, is quite another matter.
Plastics, especially single-use plastics in packaging, has been instrumental in making a lot of products more affordable to more people. And while electronics, for instance, can certainly be sold in non-plastic packaging, fresh fruit, vegetables, and meat are another matter—and expensive matter.
The European Union just this week approved new rules on packaging aimed at reducing waste. One of these rules was, in fact, a ban on single-use plastic packaging for fresh fruit and vegetables from 2030. This means that from that year on, tomatoes, for instance, would be sold in probably cardboard packages. This would make them more prone to damage, which would lead to more food waste by supermarkets. This would make tomatoes as a whole more expensive. And it will affect more than just tomatoes.
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It seems, then, that while noble, the goal of reducing plastic pollution may be harder to achieve than it seems. The UN talks are a good example themselves. In a recent update, one green NGO present at the event said that the United States had refused to consider any additional moves besides current legislation on the topic of plastics. If the biggest plastics user in the world refuses to consider anything in addition to already existing legislation, the chances of the rest of the world agreeing to something that could have a palpable effect on plastics use are not exactly huge.
The oil industry, however, is worried. Media have been reporting that there were a lot of attendants of the UN talks in Ottawa from the oil and petrochemicals industry, with the Guardian lamenting the fact that “Fossil fuel and petrochemical campaigners at Ottawa summit outnumber scientists, EU and Indigenous delegates.”
The report above cites BP predictions that plastics will come to account for as much as 95% of oil demand growth in the two decades to 2040, which echoes a lot of other forecasts for oil demand prospects. Indeed, plastics are widely seen as the biggest driver of oil demand in the future, although we might end up surprised at how long demand from the transport sector endures in view of the latest developments in EV markets.
It is little wonder then that the oil industry seeks to protect this demand driver—and it has some solid backing from science. Plastics are a huge contributor in making modern healthcare as safe as it is, and, arguably more importantly, it has an equally huge contribution in making a lot of foods affordable for more people – simply because plastic packaging reduces the costs of transporting and storing these foods. Yet while plastics used in healthcare are safe from bans, at least for now, plastics in food packaging are a target.
“The issue is pollution. The issue is not plastic.” This is according to Exxon’s head of product solutions, Karen McKee, who recently told the FT that “A limit on plastic production will not serve us in terms of pollution and the environment.”
Alternatives to plastic packaging could have a bigger emissions footprint, McKee argued.
If this sounds familiar, it is probably because it smacks of the arguments made against the electrification of transport in light of all the raw material mining, refining, and processing inputs into EVs that cast a shadow over its zero-emission credentials.
The simple truth is that plastics are used on such a massive scale because they are one, convenient, and two, cheap. Plastic ban advocates would need to come up with alternatives that can offer the same combination of convenience and price to stand a chance at succeeding with the bans on any meaningful scale.
The situation is very much a reflection of the energy transition itself. Wind, solar, and EVs, not to mention hydrogen, have consistently failed to dethrone oil, gas, and even coal from their top spot in the global energy mix. This remains true even as the expansion of wind and solar has made gas and coal generation a lot less competitive in the absence of the same subsidy treatment.
Alas, the alternative to plastic production bans would be better disposal processes and more recycling. Unfortunately, recycling, too, must be profitable for this to work, and much of it simply isn’t profitable. The world has a plastic waste problem. Bans may solve this problem, but they would create new and potentially graver ones. It is certainly a serious conundrum.
By Irina Slav for Oilprice.com


Apr 29, 2024 13:59
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