Just when they thought they were ready for the decline of gasoline- and diesel-fuelled cars, driven by surging electric vehicle sales, a mounting aversion to plastics is undercutting fossil producers’ latest plan to save their industry, according to market analysts at New York-based MSCI.
“Oil and gas producers are preparing for a decline in demand for gasoline and diesel as electric cars replace fossil fuelled vehicles, but they have been taking solace in the thought that the petrochemicals market would still need a lot of oil as a feedstock,” business and environment specialist Mike Scott writes on Forbes. “But now that source of demand may be under threat as well, thanks to the global backlash against plastics from both consumers and regulators.”
MSCI sees materials demand, not energy, accounting for more than half of the increase in oil demand through 2050. But “tighter global anti-plastics regulations and shifting consumer preferences could limit the upside of these investments,” Scott warns, citing fossils like PTT, Total, Formosa, and IRPC that already depend on petrochemicals for more than a quarter of their revenue.
“When valuing oil and gas companies, could a rise in recycling technologies and non-fossil-based alternatives make conventional virgin plastic the next stranded asset?” MSCI asks. The firm adds that “a growing legal and consumer backlash against plastics pollution may threaten the economics of further petrochemical and oil and gas developments.”
Some chemical producers are already responding to the backlash by reducing their use of oil and gas, Scott adds. “Companies such as BASF, Indorama, Eastman Chemical, and LyondellBasell have developed, partnered with, or acquired plastics recycling businesses,” he writes, citing the MSCI report. “Some of these businesses aim to convert or decompose waste plastics back down to their basic monomer or intermediate building blocks, which can be used as alternative raw materials to create chemicals.”
That market is expected to grow, “not least because recycling can cut energy and resource use. The report highlights companies such as Colgate-Palmolive, Danone, Diageo, L’Oréal, PepsiCo, Tupperware, and Unilever, along with numerous other packaged good companies, that have committed to use at least 25% post-consumer recycled materials in their packaging by 2025, up from virtually nothing today.”
Plastic packaging companies like Amcor and Sealed Air have also “pledged that all their packaging products will be either fully recyclable or reusable by the same year.”
Fossils’ customers are also on a hunt for alternative solutions, like truly biodegradable plastics produced from corn. “There are issues with bioplastics, such as the risk of deforestation and using land that should be used to grow food, as well as contamination of conventional plastic recycling streams,” Scott writes. “But particularly if they become more biodegradable, they could contribute to a fall in demand for oil and gas.”
