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The relationship between oil and plastic and what that means for recycling

By May 8, 2020August 27th, 2020No Comments

As the price of oil plummets and plastic production skyrockets, the plastic recycling industry suffers.

Approximately 4% of the world’s oil production goes into the production of virgin (new) plastic. New plastic is derived from one of crude oil’s fractions, namely, naphtha. This occurs through a five-step process, starting with crude oil extraction.: We start with crude oil being extracted from the ground. Next, the second step refines the crude oil is refined into various partitions ranging from asphalt to petrol and notably, naphtha. The third step converts naphtha into ethene through a process called cracking. The fourth step polymerises the ethene into polyethene that can be extruded into raw plastic material. Finally, the fifth step of the process takes the extruded plastic pellets and turns it into plastic products.

So now that we understand the plastic creation process, lets dive deeper into how plastic creation has affected plastic recycling.

The oil trade war between Russia and Saudi Arabia combined with corona virus’ impact on oil demand means that the supply of oil greatly outnumbered that of demand. The price of all oil is therefore significantly reduced. According to Bloomberg the price of oil in the first quarter of 2020 dropped to its lowest point in twenty-one years. With abundant oil, the cost to produce virgin plastic is further decreased, in turn applying more pressure on companies to switch from recycled plastic to the cheaper alternative of virgin plastic.

According to the Financial Times, major companies including ExxonMobil, Dow and BP invested $200 billion in chemical production facilities, critical to the production of plastic. However, the enormous investment into these chemical factories have led to a large over-supply of virgin plastic. This oversupply decreases the cost of virgin plastic to the point where recently it fell below the price of recycled plastic. This has prompted companies to abandon their sustainability initiatives in favour of a cheaper raw material.

This problem is only worsened by our global lack of recycling infrastructure. According to Alph Grid from the Financial Times “seventy-eight million metric tonnes of plastic packaging is produced globally, each year, but only fourteen percent of that is recycled”. Furthermore, Rob Buurman from Recycling Network states, “we have so many single-use plastics because it costs basically nothing to produce; that will make It extremely difficult to develop other types of economy that for example rely on reuse”.

As margins tighten across the industry, it is imperative that consumers vocalise their desire for recycled plastic. Creating demand will help ensure that companies incorporate recycled plastic content into their packaging and products and maintain their sustainability commitments.