‘War on plastic’ could strand oil industry’s £300bn investment

The war on plastic waste could scupper the oil industry’s multi-billion dollar bet that the world will continue to need more fossil fuels to help make the petrochemicals used in plastics, according to a new report.

Major oil companies, including Saudi Aramco and Royal Dutch Shell, plan to spend about $400bn (£300bn) to help grow the supply of virgin plastics by a quarter over the next five years, to compensate for the impact of electric vehicles and clean energy technologies on demand for fossil fuels.

Industry data has predicted that plastics will be the largest driver of oil demand growth in the coming years but new figures suggest these investments may be left stranded as global governments push through plans to cut single-use plastics and increase recycling to help tackle plastic pollution.

The report by thinktank Carbon Tracker found that demand for virgin plastics may peak in 2027, as its growth slows from 4% a year to 1%, strengthening the theory that global oil demand may already have reached its peak in 2019.

“Remove the plastic pillar holding up the future of the oil industry, and the whole narrative of rising oil demand collapses,” Kingsmill Bond, energy strategist at Carbon Tracker, said.

The report described the plastics industry as “a bloated behemoth, ripe for disruption” by governments eager to reduce its heavy carbon footprint and tackle the scourge of plastics in the world’s oceans.

Earlier this summer the EU proposed a tax of €800 (£713) per tonne for unrecycled waste plastic, months after China announced a ban on non-biodegradable single-use plastics in major cities from the end of this year, and in all cities and towns by 2022.

Meanwhile BP agreed to sell its petrochemicals business for $5bn to Ineos, which is owned by British billionaire Sir Jim Ratcliffe, after warning that a ban on single use plastics would hit oil demand over the coming decades.

Manufacturing less plastic, which is made from refined fossil fuels, could wipe millions of barrels of oil from global demand forecasts which have already fallen in recent months due to the impact of the coronavirus pandemic on travel patterns.

It could also help reduce carbon dioxide emissions which are estimated to reach five tonnes for every tonne of plastic produced, or 1.75 gigatonnes of carbon dioxide a year.

“It is simply delusional for the plastics industry to imagine that it can double its carbon emissions at the same time as the rest of the world is trying to cut them to zero,” Bond said.