Petrochemicals are becoming increasingly important to the oil industry as cars go electric.
The fossil fuel industry's lobbying has been effective in Washington, slowing efficiency improvements for cars, rolling back light bulb regulations, and so much more. But the rise of the electric car is expected to put a big dent into demand. According to the International Energy Agency (IEA), this will put more emphasis on petrochemicals, which now use 15 percent of fossil fuels as their feedstocks, but is expected to rise to 50 percent by 2040. According to Tim Young in the Financial Times,
It is the only major source of oil demand where growth is expected to accelerate. These forecasts assume a steady, strong demand for plastic will translate into increasing consumption of feedstock. They provide a rare ray of optimism for the oil industry against increasingly dire long-term predictions that growth of other demand sources will slow.
So what happens if the war on plastics catches on? Big trouble. Just reduced demand for plastic bags and increasing recycling from 5 to 25 percent could change all these projections and investments in new capacity.
Using the IEA World Energy Outlook as a benchmark, these two modifications would diminish oil demand from petrochemicals in 2040 by more than 20 per cent. It could bring projected peak oil demand forward by a decade and diminish the need for oil-based petrochemical production capacity by 20 per cent. The dent in oil demand by 2040 would exceed the one that the IEA predicts would accompany the introduction of electric cars.
Tim Young thinks this will make a big dent in the industry, and that "if companies push ahead with investment based on standard forecasts to expand petrochemical operations, stranded assets may lie ahead." I wonder if he underestimates the ingenuity and power of the oil industry.
We have seen this movie before, where the fossil fuel industry essentially created demand by their petrochemicals by promoting a linear economy of disposable plastics – similar to how they now are promoting waste-to-energy because it keeps them in the feedstock business; how Keurig has taken over the coffee world; how big money is now being invested in the food delivery business, almost all of which comes in single-use plastic.
On the flip side, we have seen states like Michigan pass laws to stop plastic bag bans and, as Katherine noted, the oil industry is putting intense pressure on local governments all over the USA. She says we have to fight back:
While municipal bag bans, the zero-waste movement, and anti-straw campaigns are miniscule when faced with the construction of multi-billion-dollar petrochemical facilities, remember that these alternative movements are far more noticeable than they were only five years ago – or even a decade ago, when they didn’t exist yet. The anti-plastic movement will grow, slowly but steadily, until these companies cannot help but pay attention.
But we are up against the biggest, most powerful industry in the world, which will keep developing ever more convenient and attractive ways for us to use more and more plastic. Anyone for Uber Eats tonight?