Oil Majors Face Further Pain As Plastics Fall Out Of Fashion

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Images such as this seal pup choking on fishing line have driven a backlash against plastic packaging that is set to translate into reduced demand for oil and gas. GETTY

Oil and gas producers are preparing for a decline in demand for gasoline and diesel as electric cars replace fossil fuelled vehicles, but they have been taking solace in the thought that the petrochemicals market would still need a lot of oil as a feedstock.

But now that source of demand may be under threat as well, thanks to the global backlash against plastics from both consumers and regulators.

That’s the view of index provider and investment analyst MSCI, which says that “amid the shift toward electric vehicles and global efforts to rein in fossil-fuel emissions, oil demand for road transport may peak in 2025”.

In response, oil and gas companies are expected to pivot toward petrochemicals, mainly inputs for plastics. Materials, rather than energy, may account for more than half of oil-demand growth by 2050, MSCI says.

But, it adds, tighter global anti-plastics regulations and shifting consumer preferences could limit the upside of these investments. “When valuing O&G companies, could a rise in recycling technologies and non-fossil-based alternatives make conventional virgin plastic the next stranded asset?” MSCI asks. Continue reading here.....

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