The War on Plastic could affect oil demand more than expected

A war is being waged on plastics. Recent documentaries such as David Attenborough’s Blue Planet Series have highlighted the potential damage caused to sea and ocean life, the huge collection of it on the shore of global beaches and the environmental damage of its incineration.

Consumers have responded; in conversation with a household and personal product company, we were told that consumers have never responded to any issue as rapidly and seriously as to this one. A good indicator might be use of plastic bags in the UK – now down 90% from it’s peak.

Governments are following suit – the European parliament has recently voted to ban single-use plastic cutlery, cotton buds, straws and stirrers as part of a sweeping law against plastic waste. Many countries and states have moved to ban single-use plastic bags including New York, California and Kenya.

Companies are making big changes too. A major industry for this is the household and product industry. Companies such as P&G have goals to make 90% of packaging recyclable, or PZ Cussons which aims to reduce plastic use by 25% and recycled content to 30% by 2025. Retailers are demanding this from their suppliers, alongside their own goals such as that of Tesco for 100% of own-brand packaging to be fully recyclable by 2025. The Japanese firm Seven & I is another good example with their commitment to use 100% ‘environmental packaging’ by 2030.

The global recycling rate of plastics is just 12%; with the highest rate of recycling in an individual country above 60%, there is plenty of headroom for improvement. This growing demand for recyclable products and the ability to recycle is leading to changes throughout the value chain, including the plastics packaging companies themselves.

With all these efforts to reduce plastic waste, it makes sense to review the outlook for demand for virgin plastic and ultimately the materials required to make this.

The International Energy Agency estimates that petrochemicals, of which plastics are an important part, will account for one-third of the growth in oil demand by 2030 and nearly half of it by 2050. It’s the only major source of demand for oil that is expected to accelerate in growth. An important assumption behind this forecast is that plastic demand will continue to significantly outpace global economic growth.

Considering 45% of plastic production is for packaging material, there may be risk to this forecast. Which means all these individual efforts to enact change could have quite wide-reaching consequences.

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