As people switch to electric cars, or at least buy more fuel-efficient versions of traditional vehicles, energy companies will have too much oil on their hands. ..Energy companies hope consumers will soak up the glut through their clothing, food and electronic goods. Exxon Mobil expects demand for products that have fossil fuel-derived components and shells like “cellphones and medical supplies, as well as products necessary to preserve food and improve hygiene” to increase.
Crude oil and natural gas are turned into petrochemical feedstocks such as naphtha or natural gas liquids in a gas-processing plant or at an oil refinery. They are then “cracked” into the building blocks of common plastics. Ethylene is processed into polyethylene, which winds up in plastic bags, shampoo bottles and children’s toys. Polypropylene is used for everything from car bumpers to carpets. ..Today, 15.4% of global oil demand is driven by petrochemicals, according to data from Wood Mackenzie. The share is expected to rise to 19.1% by 2035 as emerging markets become wealthier and swelling middle classes spend more on synthetic clothing and do their grocery shopping at big supermarket chains, where food is more likely to be wrapped in plastic to prolong its shelf life. Advanced economies like the U.S. use up to 20 times more plastic than developing nations on a per capita basis, according to the IEA. Big Oil’s bet is that shoppers in emerging markets will close at least part of that gap.
Energy companies are pouring billions of dollars into petrochemical facilities, notably in China where ethylene capacity has almost doubled since 2019. Capacity is also rising in the U.S. and Middle East. Saudi Arabia wants to invest $600 billion into petrochemicals by the end of the decade to secure nonfuel uses of its crude oil.
But the global petrochemical industry is already saturated and capacity is expected to outstrip demand until at least 2030. This points to weak profit margins and less-than-ideal utilization rates at petrochemical facilities. Plants in high-cost regions are shutting down. Exxon Mobil sold refineries in Italy last year and plans to close an ethylene cracker in Normandy, France…Pumping money into petrochemicals as governments are trying to solve the problem of plastic waste feels risky…. A worldwide ban on single-use plastic would wipe out a third of global plastic demand that comes from things like mini hotel toiletries, fast-food packaging and disposable cutlery, although there would probably be exemptions for categories like medical intravenous bags that are hard to substitute.
Excerpts from Carol Ryan, Driving an EV? Big Oil Hopes You Don’t Cut Down on Plastic Too, WSJ, Dec. 24, 2024
