Plastics: The Last Straw for Big Oil?


The loss of value for the oil and gas industry caused by COVID-19’s economic slow-down highlights the coming structural difficulties for oil and gas companies from an accelerating clean energy transition. As the industry faces a decline in demand for oil and gas, some companies have offered a theory of growing global demand for petrochemicals, especially plastics, as justification for continued exploration and extraction of fossil fuels. Oil companies describe this growth as aligned with society’s goals to responsibly decarbonize. Yet, in a world that is awash with plastic production and waste, facing a continued climate crisis, and seeking environmental justice and equity, the proposed expansion of plastic production raises red flags for investors and requires enhanced scrutiny.

While plastics and other petrochemical products are predicted to overtake the transport sector as the largest driver of future global oil demand, fossil fuel companies risk overinvestment in the space. Companies that rely on growing demand for plastics and other petrochemicals must justify these plans in the face of a range of global structural changes that may deflate these elevated demand growth expectations. Peeking behind the veil of the industry narrative exposes the abundant ESG risks and externalities presented across every stage of the plastic lifecycle.

This report provides investors an overview of the landscape of risks posed by the petrochemical sector and its planned plastic buildout, including stranded assets, climate change impacts, plastic pollution of land and oceans, the greenwashing of “circular” solutions, public health impacts, and a loss of social license to operate. Critical questions are provided in each of the risk areas to encourage productive investor engagement with companies that are lacking transparency in their disclosures. More comprehensive disclosures in the areas described will add clarity and enable better accountability in this evolving field.