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Page added on January 7, 2018

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Bioplastics Threaten Big Oil

Alternative Energy
Plastics

What sector will account for the largest source of oil demand growth over the next two decades?

Most people might assume transportation, with hundreds of millions of people in the developing world acquiring cars for the first time. However, according to the International Energy Agency (IEA), the petrochemical industry will represent the largest source of additional oil consumption through 2040.

By 2040, the IEA actually sees oil demand from passenger vehicles declining, while road freight accounts for a growth of 4 million barrels per day (mb/d). Aviation adds 3 mb/d and maritime shipping adds another 1.4 mb/d.

On the other hand, the manufacturing of petrochemicals such as plastics will add 6.2 mb/d to global oil demand by 2040, according to the IEA’s New Policies Scenario, which incorporates the effects of policies from governments that have already been announced.

The debate over ‘peak oil demand’ typically comes down to how fast and how widespread the adoption of electric vehicles will be. Tesla is held up as a harbinger of the coming wave of EVs, and the flurry of announcements from incumbent automakers to switch over to EVs is cited as proof that peak oil demand is near.

But there is a case that the real debate should be over plastics and how much the petrochemical industry continues to grow.

The IEA notes that historically, the increase in the consumption of plastics tends to track GDP growth, and that link has been pretty tight even as the correlation between primary energy consumption and GDP has started to decouple in recent years.

The IEA predicts that the demand for high-value chemicals such as ethylene, propylene and aromatics will grow by 60 percent between 2016 and 2040 to 560 million tonnes. Moreover, that could understate the potential growth rate—if new innovations in the chemical industry attract a deeper switchover to plastics from woods and metals, then oil consumption in petrochemical industry will grow by even more.

In addition, the threat to oil from the greater adoption of EVs is undercut by the relative greater use of plastics in EVs compared to conventional vehicles.

Overall then, the highly-anticipated peak of oil demand may prove elusive if the petrochemical industry continues to expand at such an unbridled rate. The IEA believes petrochemicals alone will more than offset the oil demand loss in passenger vehicles from EVs.

There are, however, threats to petrochemical demand as well. The IEA noted in its World Energy Outlook that China has made significant investments in coal-to-olefin and methanol-to-olefin (CTO/MTO) processes, which would allow China to use its coal reserves to produce plastics rather than depend on imported oil. This, however, is probably not going to be the dominant story going forward, with serious questions about both the economics and the environmental impact.

On the other hand, there are plant-based alternatives that are starting to gain attention. The consumption of bioplastics made from sugar cane, wood and corn could jump by 50 percent over the next five years, according to the European Bioplastics Association, cited by Bloomberg. “Biochemicals and bioplastics could erode a portion of oil demand, much like recycling can erode overall virgin plastics demand,” Pieterjan Van Uytvanck, a senior consultant at Wood Mackenzie, told Bloomberg. “Provided the challenges facing biomass today are overcome, it will become a larger portion of the supply.”

Still, bioplastics are growing from a small base, controlling only one percent of the market. The IEA argues that the growth of bioplastics will be “largely determined by the cost competitiveness of the production process and by the future availability of biomass feedstock.”

Bioplastics are more expensive than traditional petroleum-based plastics, and the IEA says that price parity will be hard to achieve without technological breakthroughs. At the same time, the feedstock might be used elsewhere – sugar cane in ethanol, for example. That could challenge the availability of the feedstock for bioplastics.

The IEA sees more potential in the less-sexy practice of recycling and efficiency. For instance, if recycling increases from 15 percent to 33 percent, and if end use plastic consumption were reduced by five percent through ‘light-weighting’ (reducing the weight of products, and thus using less plastic), it could eliminate roughly 1.5 mb/d of oil demand by 2040. Bloomberg Intelligence estimates that it takes 8.5 barrels of oil to manufacture 160,000 plastic bags.

But plant-based materials have the advantage of smaller carbon footprints while also being able to naturally biodegrade, a non-trivial benefit considering the country-sized mountain of plastic in the Pacific Ocean.

 

However, the IEA still sees a minimal impact on oil demand from bioplastics for the next two decades due to higher costs.

The IEA has obviously been wrong before and could be underappreciating the potential of bioplastics. Bloomberg profiled several companies working on different alternatives, including Coca-Cola, BASF and Stora Enso. Many of them are confident that costs will come down as the bioplastics industry matures.

The oil industry is obviously keeping an eye on the situation. With EVs threatening to eat into the demand for oil in the transportation sector, the best bet for Big Oil is to get into petrochemicals. Bioplastics, in turn, would hit oil companies on that front as well.

“Attitudes are evolving,” David Eyton, the head of technology at BP Plc, said in a Bloomberg interview. “The question that faces the petrochemicals industry that has yet to really be answered is, ‘How are people going to deal with some of the environmental impacts of petrochemicals? Particularly plastics, which are a growing concern.’”

By Nick Cunningham of Oilprice.com



11 Comments on "Bioplastics Threaten Big Oil"

  1. coffeeguyzz on Sun, 7th Jan 2018 6:50 pm 

    Nick Cunningham has been cited by many observers for posting highly questionable analysis in his columns, this one being a standout example.

    There is currently $200 billion worth of petchem plants being built in the US to capture NGLs, NOT so much oil.
    Propylene and ethylene are far more economical to produce from purity ethane and propane than from crude oil.

    Reliance Industries in India is making an extra $300 million per year processing US sourced ethane rather than crude.
    And this entails shipping it half way around the world from Morgan’s Point.

    Biggest US producer of ethane, Antero, currently puts out 100,000 barrels/year.
    It STILL rejects 125,000 bbl/yr due to infrastructure constraints.

    Huge global shift in manufacturing is underway to the US to capture extremely cheap feedstock (ethylene and propylene, primarily) and the cheapest electricity costs anywhere. This, due to abundant methane fueling ultra efficient CCGT plants.
    Concerns are being raised about the “De-industrialzation” of Australia surrounding their increasingly erratic, expensive power supplies as they are more and more generated by Ra and Zephyr.

  2. davy on Sun, 7th Jan 2018 8:02 pm 

    We already have a call on foodstocks with biofuel production and now they talk about adding bioplastics to that. What would it take for the world to be food insecure? We don’t realize how quickly it can happen.

    “HOW LONG CAN THE WORLD FEED ITSELF?”
    https://tinyurl.com/y94tdjtw

    “For the sixth time in the past seven years, the human race will grow less food than it eats this year. We closed the gap by eating into food stocks accumulated in better times, but there is no doubt that the situation is getting serious. The world’s food stocks have shrunk by half since 1999, from a reserve big enough to feed the entire world for 116 days then to a predicted low of only 57 days by the end of this year.”

  3. Go Speed Racer on Sun, 7th Jan 2018 8:08 pm 

    Thanks Davy, thats an eye-opener.
    Makes me want to fill my fridge up fuller.

    The freezer could hold quite a few pepperoni
    pizzas, and I could put lots of potato chips
    in the cupboard.

    Ketchup keeps a long time, I could put some
    bottles under the stairs.

    But then I saw the article is dated 2006.
    Surely the crisis already over, and I
    can go back to ordering Chinese take-out
    delivered like normal?

  4. Boat on Sun, 7th Jan 2018 11:07 pm 

    Davy,

    Why do you worry about feeding the poor. History has shown that death from famine can’t compete with breeding. Check out the Middle East, in spite of war, malnutrition, massive migration etc. their populations have been exploding. BAU is what it is.

  5. JH Wyoming on Mon, 8th Jan 2018 2:03 am 

    “There are plant-based alternatives that are starting to gain attention. The consumption of bioplastics made from sugar cane, wood and corn could jump by 50 percent over the next five years, according to the European Bioplastics Association, cited by Bloomberg.

    But plant-based materials have the advantage of smaller carbon footprints while also being able to naturally biodegrade, a non-trivial benefit considering the country-sized mountain of plastic in the Pacific Ocean.”

    Biodegradable plastics should be mandated worldwide.

  6. deadly on Mon, 8th Jan 2018 3:17 am 

    Corn starch and vinegar with some heat will yield bioplastic. Cornstarch and water with a little bit of oil will yield bioplastic.

    Not that much corn starch is consumed by humans, so bioplastics is a value added product. Although, corn starch gravy is good when flavored with roadt beef drippings, do you can’t use all of the corn starch for bioplastics, gotta have some to make good gravy, good gravy.

    Artists should not use brushes and paints. A waste of resources.

    All they really need is soot from candles and they then can burn their art on cave walls. The minerals in the parent material inside the cave can make the art an indelible mark for centuries.

    Energy wasted on canvas and wood frames will not be tolerated.

    Only state-sanctioned art is allowed. Anti-government graffiti will be punishable by death. Only government art will be displayed and in support of all government propaganda.

    The world needs to become more like the Democratic People’s Republic of Korea.

    Only state-sanctioned bioplastics can be commissioned.

    It will be illegal to make bioplastic unless you obtain a permit.

    Big Oil has to survive and the DPRK will lend a helping hand.

    All your oil to us belong, you won’t get any anymore says the DPRK.

    The world is watching.

    Donald Trump is a stable genius.

    Hilarious.

  7. Davy on Mon, 8th Jan 2018 4:22 am 

    “Why do you worry about feeding the poor.”
    I wasn’t making a moral statement. It is about the mathematics of it all. In the global picture it is also about economics. It’s about systematic limits. The rich are vulnerable too they just think they are not. You know the habituation of the possession of money.

  8. Davy on Mon, 8th Jan 2018 4:29 am 

    “Biodegradable plastics should be mandated worldwide.”

    There are lots of new behaviors to mandate and bad ones to eliminate. I think mandating bioplastics is not at the top of that list. I doubt much behavior management is going to happen anyway except though price in the market place. Markets seem to get people’s attention. This is sad because when everything is valued by price then we have lost touch with some very important values that are human and beyond the reach of price. We are becoming less and less human the more affluent we become. We talk of the savages of old. Who is really the savage?

  9. dave thompson on Mon, 8th Jan 2018 9:21 am 

    Anyone caught cutting into the dominant cultures corporate capitalistic profits, will be beaten, put in jail and or killed.

  10. Sissyfuss on Mon, 8th Jan 2018 10:54 am 

    In a positive note, when one has no food to put into their bioplastic bowl, they can nibble on the bowl itself. Winning!

  11. dissident on Mon, 8th Jan 2018 11:06 am 

    What a retarded title. How can some tiny component of the oil demand threaten oil in any sense. If today all plastics were to be made from fairy dust, global drilling and oil production would not stop or even drop enough to change the oil price.

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