The oil industry is no stranger to environmental discussions. Its long-term forecasts have focused for years on how global warming and the rise of electric vehicles may reduce the world’s appetite for crude oil. Yet the sector has spent far less time thinking about another change that could have just as large an effect as electric vehicles: the war on plastic. As businesses eliminate plastic straws and bags, and governments act to reduce disposable packaging, this will have profound implications because plastic, of course, is ultimately made of crude oil.
Transportation currently gobbles up more than half of global oil consumption. The petrochemical industry – which takes crude oil as a feedstock and converts it into the chemicals from which plastics are made – absorbs less than 15 percent. Yet it is expected to deliver half of global oil consumption growth to 2040
The International Energy Agency predicts the contribution of the petrochemical industry to overall oil demand growth will increase by more than 2.5 times to 2040 compared with 2000-17. Itis 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.
Yet there is a problem. These forecasts assume that, because plastic demand increased significantly faster than global economic growth in the past, it will continue to do so, although the gap between the two may narrow. This assumes that today’s emerging markets will replicate prior consumption patterns. Some analysts also claim that “invisible” plastic – components of digital infrastructure, electronic gadgets, and smartphones – will become a new source of irreplaceable demand.
These are dubious propositions. About 45 percent of plastic production is for packaging material; electronics account for 7 percent. The EU boasts the highest recycling rates in the world – 30 percent of collected waste – but still has managed to increase its use of recycled plastic from a comparatively high level. Kenya has already banned single-use plastic bags. Why wouldn’t other emerging markets leapfrog this hallmark of modern civilization, as they have done with fixed-line telephones .