Why ExxonMobil, Sinopec and Dow Are Betting On Plastic - YouTube

The world is transitioning away from fossil fuels.

It's not happening overnight, but wind, solar battery storage and electric cars are all getting cheaper.

The power grid is getting greener.

And oil and gas companies are getting nervous.

The writing is on the wall for these companies.

By and large, their products are not going to power the future,

So they have pivoted to plastic production.

Plastics is the Plan B for the fossil fuel industry.

Fossil fuels are the building blocks of plastic, which are set to become the largest driver of global oil demand.

The International Energy Agency forecasts the plastics will account for about 45% of demand growth by 2040, while BP expects that they'll drive 95%

of demand growth.

We make about, give or take, 300 million tons of plastic a year and less than 10 percent of it is recycled.

So literally in about three to five years, there is going to be a billion tons of plastic waste.

Everyone can see the problem.

Single-use products make up about 40% of all plastics, and one survey of over 19,000 adults found that 71% of consumers worldwide want to ban them.

Poll after poll, consumers are saying they want more choice and they want to avoid plastics whenever possible.

Yet producers are still planning for growth in the nearly $500 billion plastics manufacturing industry, as oil and gas rich countries look to

export the building blocks for plastics, like ethane, to emerging markets.

Every company who is currently engaged in producing plastic, if you look at their capital budgets for the next two to three years, they're

all talking about expansion plans.

The negative externalities of plastics go beyond waste.

Making a metric ton of plastic produces about five metric tons of carbon dioxide, as well as cancer and asthma-causing air pollutants, which affect

the low-income communities where petrochemical plants are usually located.

The air is polluted and the water is dirty.

And we can't plant our garden anymore because the chemical plants polluting the soil.

Players all along the supply chain largely acknowledge the waste component of the problem.

But historically, they've been opposed to efforts to address it, like bans on certain single-use items or laws that shift the burden of waste

management from the consumer to the producer.

As states and countries around the world scramble to rein in plastics production and waste with new laws, the oil and gas industry, alongside

chemical companies, are looking towards the developing world as their next major growth market.

There are a number of key players in the single-use plastics and packaging supply chain.

First, fossil fuel companies convert crude oil and natural gas into ethane and propane at refineries.

These are the building blocks for most plastics.

They're sent on to processing facilities called crackers, which are either owned and operated by the oil and gas companies themselves, or by chemical

companies like Dow and LyondellBasell.

Inside the crackers, the compounds are broken down and transformed into ethylene and propylene.

Next, they undergo the process of polymerization to become polyethylene and polypropylene, the most common plastics in the world.

ExxonMobil is the largest polymer producer, followed by Chinese oil and gas company Sinopec and then Dow in third.

The Chinese and Saudi governments are big players themselves, since they partially own many of the largest producers.

Other oil majors like Total, Chevron and Shell are also industry leaders.

As the last step, small plastic pellets are molded into finished products by packaging companies like the Reynolds Group, Amcor and Sealed Air.

We take those pellets and we melt those down and force those through what we call dyes into forming, you know, different shapes.

In our case, we form films.

They are making the finished product for the large brand owners like the Unilevers, the P&Gs, the Mars food companies and the bag producers

and suppliers to the large grocery chains like the Walmarts, the Coca-Colas, the Pepsis.

Of course there are plastic alternatives such as paper and glass, which aren't made from fossil fuels.

But they also have large carbon footprints, and it's undeniable that plastics have some enviable attributes.

The challenge is petrochemicals are fantastically good at what they do in terms of lightweight, flexibility,

durability, versatile.

And that's why they've sort of become ubiquitous.

If I look at the room around me, there's sort of petrochemicals everywhere.

The issue with food is if it's distributed in a fresh format, then plastic becomes a very, very important material to be able to extend the

shelf life of that food.

And it's hard to beat plastic when it comes to price.

One of the many reasons why it's cheap is because it's part of the fossil fuel subsidies that state and federal governments provide to the fossil

fuel industry.

Worldwide, only nine percent of all plastic ever made has been recycled.

The rest is incinerated, landfilled or ends up as litter on the land or in the sea.

Basically, that's because as it stands, it's cheaper to make virgin plastic than to recycle it.

And while it may not be possible or desirable to eliminate all plastic packaging, the waste and air pollution problems are only set to worsen, as

Wood Mackenzie predicts that global petrochemical demand will nearly double by 2050.

Plastics are the largest segment of the petrochemical market,

So that's 10 million tonnes of growth each and every year.

So that's the equivalent of three to four, sort of, new world-scale steam crackers need to be built in each and every year.

Consumers may not want more plastic, but the industry sees it as a cash cow, especially in the U.S., where the shale revolution has made oil and

natural gas cheaper than ever.

We're not expecting demand growth in the U.S., but it could be where facilities get built to satisfy global demand growth.

210 new petrochemical facilities and expansions have been built in the United States alone in the past decade.

Globally, Wood Mackenzie says that today there are 44 projects in the construction or planning phase for the production of ethylene, the most

common plastics building block.

So what is driving this is just this glut of fracked gas, and the fossil fuel industry

teaming up with the chemical industry to just crank out more and more plastic.

And if the demand is not needed in the United States, they export it to other countries.

Indeed, it seems that the plastics market in the developed world is largely saturated.

So the industry views China and other emerging economies as its main growth market.

So if you look at packaging being such an important component of life, if you will, whether it's in food, whether

it's in medicine, clothing, anything related to GDP growth across the globe, unfortunately, plastic is the best

product that is out there.

That does not necessarily imply that you should have a plastic waste problem.

But without the incentives and infrastructure that would make recycling economically feasible, and without more investment in reusable packaging

and distribution models, the developing world is getting flooded in plastic.

Alongside Middle Eastern oil giants like Qatar, Saudi Arabia and the UAE, the United States is a leading producer and exporter of plastic feedstocks

and polymers, which are used to create new plastics products.

Asia in general, and China specifically, are the largest importers of these plastic building blocks.

China used to import and recycle much of the world's plastic waste too, but it stopped in 2018 since lots of it was too contaminated to be

repurposed. So now, the world's used plastic is being diverted to poorer nations that don't have the infrastructure to process or recycle it.

Africa saw a fourfold increase in plastic waste imports in 2019, the year after China closed its doors.

Plastic also flooded into India, Malaysia, Thailand, Indonesia and Vietnam, which have since implemented their own import restrictions.

But put simply, that hasn't really stopped the U.S.

from sending used plastic there anyway.

Meanwhile, the domestic petrochemical buildout can have harmful effects on the communities where these manufacturing facilities, like steam crackers,

are located.

That comes with enormous greenhouse gas emissions, also air toxins in local communities and water pollution.

So this now makes plastic production a very serious environmental justice issue, because this petrochemical buildout is

happening in low-income communities and communities of color.

Sharon Lavigne is all too familiar with these issues.

She lives in St. James Parish, Louisiana, which lies along a stretch of the Mississippi River often referred to as "Cancer Alley".

It's home to over 150 petrochemical facilities and refineries, and the increased air pollution in the area has been linked to higher levels of

cancer in poor communities.

I found out it was the plants that was poisoning us, making us sick and with cancer.

I didn't know it was the industry that was supposed to be our neighbors, supposed to be so friendly.

And then I found out that when they come in here, they don't hire anybody from St.

James.

In 2018 she founded Rise St.

James with the goal of stopping the petrochemical expansion.

The organization successfully halted construction of a $1.25 billion plastics plant by Wanhua Chemical and is currently fighting to prevent

Formosa lastic from building a plant in the 5th District where Lavigne lives.

However, it looks like that project will proceed.

The 5th District is 91% black.

One time they wanted to build a plant in the white district, and the parish council voted it down.

They said no. Then when they said let's build it in the 5th District, all five of them voted yes.

Carbon Tracker, a climate-focused think tank, estimates the externalities of plastics production to be anywhere between $800 and $1,400 per metric

ton of plastic produced.

This includes the social cost of CO2 emissions, air pollution, waste management and ocean cleanup efforts.

The report concludes that these costs are not factored into the price of plastics, oftentimes leaving affected communities like St.

James Parish unable to deal with the effects.

But amidst the gloom and growth projections, there are some signs that the fossil fuel industry's bet on plastics may not pan out.

Not only has public opinion turned against plastic, but major plastics legislation is coming into effect in Europe, which is expected to greatly

reduce the amount of virgin plastic produced.

And the United States is eventually expected to follow.

Europe is clearly going to lead the way.

I think within a year, maximum two, in Europe, you're surely going to see mandatory recycled content in all packaging.

And once that happens, it's going to be like the California mileage standards.

You know, it's very unlikely people are going to have one package for Europe and another package for other parts of the world.

So I think it will surely accelerate and spread everywhere else.

The EU directive on single-use plastics mandates that by 2025, all beverage bottles made of PET plastic must contain at least 25% recycled content.

The directive also bans a wide variety of single-use plastics products like cutlery, plates and Styrofoam takeout containers, and implements an

extended producer responsibility, or EPR, scheme that makes plastics producers cover the cost of waste management and cleanup.

Maine and Oregon also recently introduced EPR laws that make plastics producers pay for recycling programs, and other states, including

California and New York, want to follow suit.

While the packaging industry objected to the Maine and Oregon bills on the grounds that they didn't give producers enough authority to manage the

funds, companies like Sealed Air and the package industry group that it's a part of have expressed a new openness to EPR laws in general.

Sealed Air is best known for its Bubble Wrap and Cryovac food packaging brands

Fees that are collected as part of plastic products in particular that get reinvested back into that infrastructure needed to recycle them

are good for the industry and good for society overall.

Though he has reservations, Cotterman also says that recycled content mandates can be beneficial, and Sealed Air is aiming to incorporate 50%

recycled content into all of its products by 2025.

In a further sign of corporate change, over 70 companies recently called for a global pact to cut plastics production and decouple it from fossil

fuels. Signatories included Amcor, one of the world's largest plastic packaging manufacturers, as well as major brands like Unilever, Wal-Mart,

Pepsi and Coke.

So I don't expect ExxonMobil or DowDuPont to change.

I do expect the big brands that are buying all of this plastic packaging to change.

But there's another reason why plastics might not be a good bet for the fossil fuel industry, and that's just simple economics.

Basically, plastics are a much smaller market segment than oil and gas.

Petrochemicals comprised just 13% of ExxonMobil's revenue in 2020, and it's the largest single-use plastic polymer producer in the world.

Petrochemicals made up 6.5% of Shell's 2020 revenue.

The petrochemical market is relatively small.

Gelder says that global demand for plastic polymers was 360 million metric tons in 2020.

Big number. But the global demand for gasoline is over a billion tons.

So if you say all of a sudden, we stop driving gasoline-fueled passenger cars and we try and divert all of that material to

petrochemicals, then you just swamp the petrochemical market and reduce its attractiveness and profitability.

Basically, plastics alone are far from keeping oil and gas companies afloat, even if demand does continue to grow.

Because if fossil fuel companies churn out more plastic than the world can use, that will just lower their profits.

And Gelder says the petrochemical industry is already overcapacity.

And so actually what we're expecting is petrochemical margins to weaken through next year, 2024, before they start to pick up again

because the industry is over-invested.

So while plastics certainly benefit from the immense power of the fossil fuel lobby, there's some real legislative and corporate power that's lining

up in favor of a more sustainable future.

The only piece of good news in this entire crisis is that unlike climate, we don't have any deniers.

Whether it's the producers, whether it's the brand owners, converters, consumers, everybody agrees that we have a huge plastic waste problem.