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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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How The COVID-19 Plastic Boom Could Save The Oil Industry

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What happens when you give industries that are frequently ostracized for their role in environmental degradation an 'open license to pollute?' They take it with open arms.

"This is an open license to pollute. Plain and simple. The administration should be giving its all toward making our country healthier right now. Instead, it is taking advantage of an unprecedented public health crisis to do favors for polluters that threaten public health," Gina McCarthy, president and CEO of the Natural Resources Defense Council, said recently

The embattled plastics industry has been handed a new lifeline after dozens of plastic bag bans on the verge of taking effect have been put on hold in several states on fears of infections by the SARS-CoV-2 virus from reusable bags.

Facing an existential crisis driven by a wave of bans nationwide, the plastic bag industry has been using the coronavirus crisis to block laws prohibiting single-use plastics. The industry has also received a much-needed shot in the arm after the Trump administration relaxed environmental laws and fines in March that have rendered companies largely exempt from consequences for environmental pollution during the COVID-19 crisis.

Hygiene over Sustainability

Even before the pandemic hit, the Plastics Industry Association had been lobbying hard to quash a host of plastic bag bans but has upped the ante during the global health crisis as hygiene takes precedence over sustainability. 

Indeed, the organization has gone as far as writing to the U.S. Department of Health and Human Services asking it to issue a public statement endorsing single-use plastics as the safest choice amid the pandemic and declaring their ban a health threat. 

Even before the virus outbreak, an industry-funded group, together with lawmakers, had proposed model legislation supporting out-of-favor plastics such as disposable bags, cups, bottles, and boxes--all in the name of safeguarding businesses and consumer choices.

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That push has also been coming in the form of tweets, articles, and op-eds by libertarian groups such as the Rio Grande Foundation, extolling the virtues of plastic bags.

Once regarded as anathema by environmentalists everywhere, disposability has become the new mantra as hygiene trumps sustainability. Fast-food chains including Starbucks and Dunkin have already suspended the use of refillable mugs on concerns over transmission. Meanwhile, some supermarket chains have banned reusable bags and can't seem to keep up with exploding demand for bottled water, masks, disposable plastic gloves, and scores of related single-use plastic products.

The pro-plastics camp certainly has the backing of the science behind it.

A recent study by the U.S. National Institute of Health has found that the SARS-CoV-2 is capable of living 2-3 days on plastic vs. 24 hours on cardboard. Related viruses such as SARS and MERS live much longer--up to nine days on plastic. A similar study by the University of Arizona in conjunction with Loma Linda University found that not only do reusable plastic bags potentially contain bacteria but also that users tend not to wash these bags very often.

Exploiting the Health Crisis

Not everyone is buying it, though.

As expected, environmentalists such as Gina McCarthy and Judith Enck, founder of advocacy group Beyond Plastics and former regional administrator for the EPA, have lambasted the manufacturing sector for openly taking advantage of the ongoing health crisis to obtain the sympathy of the powers that be.

But make no mistake about it: There are billions of dollars at stake here.

According to the American Chemistry Council, packaging, including single-use packaging, makes up about a third of the end-use demand for plastic resins. Despite stiff opposition, the $244 billion global plastic packaging market is expected to continue growing at 4% CAGR to hit $321 billion by 2027. 

And that's a big deal for the oil industry.

Petrochemicals, the category that includes plastics, account for ~14% of oil use, and are expected to drive half of oil demand growth between now and 2050, as per the International Energy Agency (IEA). 

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There are no up-to-date figures available, but the EIA estimated that in 2010, some 191 million barrels of LPG and NGL (natural gas liquids) along with 412 billion cu ft of natural gas were used to produce plastics in the United States. The liquids worked out to 2.7% of the country's total petroleum consumption, while natural gas accounted for 1.7% of total U.S. natural gas consumption. For the liquid fuels, 190 million barrels were used as feedstock, with just 1 million barrels consumed as fuel in the manufacturing process. The tables were turned for natural gas, with just 13 Bcf being used as feedstock and 399 Bcf consumed as fuel.

The proportions were higher from a global perspective, with plastics production accounting for about 4% of global oil production. Going by those averages and current global oil production of 90 million b/d, plastics consume about 3.7 million b/d and 1.24 Gbbl over the course of 12 months.

That's actually less than the amount of oil that was used to generate the world's electricity last year (oil accounts for only about 3% of global electricity production), and considerably lower than figures casually thrown around by some disingenuous activists.

Nevertheless, with over 99% of plastics manufactured from chemicals derived from fossil fuels, the elephant in the room is that plastics are only semi-biodegradable at best, taking anywhere from 10-1,000 years to decompose fully. Plastics are saturating our water and soils and interfering with our food chains. The Great Pacific Garbage Patch is inundated with 1.8 trillion pieces of plastics weighing in at a staggering 80,000 metric tons.

But until the world can find reliable and cost-competitive alternatives to plastics (which already figures to be a daunting proposition), plastics might stick around long after COVID-19 is gone, for better or for worse.

By Alex Kimani for Oilprice.com

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