Oil industry 'risks losing £300bn' as demand for plastics slumps

Drastic cutbacks in single-use plastics spell trouble for the oil industry's bottom line

The oil industry is risking $400bn (£301bn) in stranded assets by pinning its hopes on a growing demand for plastics that will not materialise, as governments and consumers move away from single-use items, new analysis suggests. 

Plastics account for 95pc and 45pc of the central forecasts of BP and the International Energy Agency, according to Carbon Tracker, as the industry looks for ways to offset falling demand from transport and heat from decarbonising societies. 

“The oil industry is really dependent on growth in this sector and that’s really dangerous,” said Kingsmill Bond, an analyst at Carbon Tracker. “The petrochemical industry already has overcapacity and is in the process of building another 80m tonnes of plastics capacity.” 

The industry has planned for 3-4pc annual growth in plastics demand in the 2020s, which will in reality only be 0-1pc, according to analysis conducted by SystemIQ in conjunction with Carbon Tracker. 

The report points to regulatory pressures on demand, including the EU’s proposed €800 per tonne tax on unrecycled plastic waste.

A rise in demand for certain plastic products such as PPE during the coronavirus pandemic is unlikely to offset the drop in demand for major items such as cars as consumers avoid making large purchases. 

Mr Bond said much of the predicted demand was in China and developing countries, which currently trail Europe and the US in plastic use. But governments in many of those countries have also sought to crack down on single use plastics amid growing awareness of the detrimental cost to the environment. 

“It’s exactly the same argument the coal industry made 10 years ago, and the car industry five years ago,” Mr Bond said. “Don’t worry about the West because demand will grow in emerging markets.” 

A plastic dumping site in Tangerang Jakarta, Indonesia Credit: Graham Crouch

Only around 5pc of plastic waste is ultimately recycled, with the same amount ending up in the ocean, and 22pc burnt, releasing dangerous chemicals. Plastic is expected to account for 19pc of the carbon budget by 2040. 

Many developing countries have pushed back in recent years on richer nations exporting their plastic waste, which often ends up being sent to landfill and burnt. 

China closed its borders to plastic waste in 2018 and has announced plans to bring in a ban on single-use plastics by 2025. 

Indian prime minister Narendra Modi has called for the country to be free of single-use plastics by 2022. 

A recent report from the New York Times alleged that US oil and chemical lobbying groups were pressuring the government to seek a trade deal with Kenya that included the country loosening its strict plastic bag ban.