The oil industry, however, is unconvinced, according to The Future’s Not in Plastics, a new report from Carbon Tracker and Systemiq released today. With petrochemical investments aimed at expanding supply for virgin plastics use by a quarter, at a cost of at least $400 billion in the next 5 years, the oil industry is staking its future on plastics, the authors write.
“While most commentators have noted that petrochemicals are a major driver of expected oil demand growth, we can go one stage further and demonstrate that it is specifically plastics within petrochemicals that drive the expected growth in oil demand,” they note.
BP, for example, in its 2019 BP Energy Outlook, forecasts (pre-COVID) that plastics will make up 95% of expected net oil demand growth to 2040. Plastics are also the largest component of expected oil demand growth - accounting for 45% of the total - in the scenario of the International Energy Association.
The Future’s Not in Plastics, compiled by independent financial think tank Carbon Tracker and Systemiq, a systems change company, presents an alternative view. The petrochemical industry is already facing record low plastic feedstock prices as a result of overcapacity. With pressure mounting to rein back the use of plastics, virgin plastic demand growth could shrink from 4% a year to under 1%, with demand peaking in 2027, say the authors.
They write that ‘five years ago, the oil forecasting industry had four pillars of oil demand growth: cars, trucks, planes, and petrochemicals. As electric vehicles have grown in popularity, so the forecasters stopped expecting growth to come from the car sector. COVID has significantly damaged airline demand for oil, and it is uncertain when if ever it will return to its 2019 levels. The success of electric vehicles in cars has meant that some forecasters now expect trucking demand for oil to peak in the near term. That leaves the oil sector, as we have seen, dangerously dependent on plastics’.
“Remove the plastic pillar holding up the future of the oil industry, and the whole narrative of rising oil demand collapses,” Kingsmill Bond, Carbon Tracker Energy Strategist and report lead author, said.