Oil companies are pouring billions into sprawling new petrochemical facilities in a bet that demand ... [+] for plastics -- which are derived from chemicals made at such plants -- will keep growing prodigiously.Anadolu Agency via Getty Images
Key takeaways:Oil companies plan to invest $400 billion into new petrochemical plants, betting that demand for plastic will keep growing.Authors of a new report say the industry and other forecasters fail to consider that large majorities favor legislation to curb plastic use and waste and that governments are acting.Plastics impose a cost of $1000 per tonne — through CO2 emissions, air pollution, and collection costs. Calls to shift those costs onto producers through taxes are growing.Outside experts said the long-term outlook for plastics demand remains uncertain and will depend on consumer preferences and government actions.
The COVID-19 pandemic and accelerating green growth around the world have eviscerated many of the oil industry’s dogmas: that renewables would suffer from high costs, that governments would slow-walk environmental commitments, that investors would continue to reward long-term bets on oil with generous market values.
But one nugget of wisdom has survived everything the market has thrown at it, and now oil companies like ExxonMobil and Shell are wagering billions on it: that the world’s demand for plastics is still growing, with no end in sight.
Only around 9% of all the oil pumped from the ground is consumed in petrochemical plants to make plastic, making it a relatively small part of the oil industry’s bottom line. But the consistent and prodigious rate of demand growth for plastics has made it an appealing investment: between 1971 and 2015, plastics production grew more than twice as fast as global gross domestic product (GDP).