Brentwood Plastics blog

Fracking shale gas - how it affects price of plastic

Posted by Joel Longstreth on Thu, May 10, 2012 @ 10:59 AM

Scroll down for update

Feedstocks are the major drivers of the price of plastics.  Whether you are for or against fracking, it has had a dramatic effect on the price of anything derived from natural gas or oil. 


Not so long ago, Alan Greenspan expressed concern about depletion of natural gas in the U S.   Time was "peak oil" was sacrosanct.  The time horizon for peak oil gets pushed farther into the future.  Now it's cool to say "peak demand".  Soon we will have benevolent government control of our electric cars and solar powered airplanes.  About a year ago, Cheniere shipped their first order of fracked natural gas to India.  Who'd a thunk it ?

Skip ahead to today and we are running out of places to store natural gas thanks to the advent of fracking.  As of March 2016 there is over 2.536 trillion cubic feet in storage.  The active rig count for oil is down to 315.

So how is this relevant to plastics ?  The debate about which feedstock choice for making plastic is sustainable is a hot topic.  Many major food companies are against bioplastics because they will drive up the price of their raw materials just as ethanol has driven up the price of protein.

Exxon and Chevron are confident enough about the continuing natural gas discoveries that they have commssioned capital intensive plants which will have a combined annual capacity of  over 5 billion pounds. Obviously, the factors of production are most favorable here in the US gulf coast.  They plan to make plastic from US natural gas, not oil.  Same goes for Braskem who is cranking up grass roots capacity for fossil fuel-derived plastic despite their success with their "green" plastic derived from sugar cane.  The common thread is that with the information they had when these plants were commissioned, the US looked like the low cost producer.  They made the right call.

The world consumed over 450 billion pounds of plastics in 2011.  About 99 % was derived from fossil fuels, though plastics production only accounts for 4% of overall fossil fuel usage.  Polyethylene capacity will increase from 324 billion pounds in 2017, growing at a rate of 3.4 %.  At the same time, global demand will increase 4.7 %. Much of that demand will be exported from American resin plants in Texas and Louisiana.

The global price of oil is a big factor in determining who has the best price for commodity thermoplastics.  If the price of oil drops enough, plastic derived from naptha will be cheaper than plastic derived from natural gas.

For the foreseeable future, most of the market is not ready to pay triple for plant based bioplastics, so plastics from natural gas looks like the most practical choice.  Major food companies are waiting for "generation 3" of bioplastics.  They do not want plastic made from agricultural sources because it would raise the price of their raw materials.  They have seen what ethanol has done to the price of protein.   " Fossil fuel" plastic is anathema to the focus groups, so they are waiting for a solution which is palatable to the general public that will not raise prices of other commodities.

Fracking will continue to widen the price disparity between fossil fuel plastics and bioplastics.  That is, unless the rules change.  The Obama administration is issuing a constant stream of regulations with the obvious end game of regulating the frackers out of business.  Despite oil and natural gas at an all-time low, the administration wants to implement a $10 per barrel tax on oil.  Hillary Clinton has stated that if all her conditions are met, there will be no more fracking. 

update January 17, 2017

What a difference a few years makes !  The scale of investment by globocorps in U S resin capacity is staggering.  It's happening not just in the traditional gulf coast, but places like Bartlesville, OK and West Virginia.  The reason why is simple: the US is the low cost producer.  Note the reference to fracking in this latest announcement of $ 1.7 billion investment in Texas.

update March 18, 2020

Even though the price of oil has collapsed, the price of natural gas has dropped as well.  At this writing, NGAS is at $ 1.87 / mmBTU which still favors natural gas.   Shell has abandoned the  $ 6.5 billion project near Pittsburgh. 
Who could have imagined ?





Read More

Topics: fossil fuels, plastic made, price for polyethylene, fracking

Is plastic from oil ? What is plastic made from ?

Posted by Joel Longstreth on Tue, May 01, 2012 @ 12:09 PM

Plastic POLYmers are made from building block MONOmers.  The naturally occurring monomers (feedstocks ) can be derived from plants, coal, natural gas or oil.

dreamstime_xs_23706085  dreamstime_xs_39797967  dreamstime_xs_22681245  dreamstime_xs_11433558 

Long chains of monomers are polymers.  Ethylene becomes polyethylene, propylene becomes polypropylene, styrene becomes polystyrene, etc.  A polymer comprised of only one monomer is known as a homopolymer.  A polymer with two monomers is called a copolymer ( ethylene vinyl acetate EVA )and you guessed it - three polymers is called a terpolymer ( acrylonitrile / butadiene / styrene or ABS is a common example ).

Bio-based plastics from plants are promoted as better for the environment because of their renewable sources vis-a-vis types of plastic made from non-renewable petroleum-based fossil fuels.  The giant food companies quickly realized "gen 1" bioplastics would skyrocket their raw material costs..  Just as ethanol increased prices for other crops, if more land is used for plastic feedstocks, the price of other crops would increase.

Plastic can be derived from both plants and conventional feedstocks without being biodegradable.  Braskem's so-called green plastics are plant plastics derived from cane sugar and are not biodegradable.  Their polypropylenes and polyethylenes are indistinguishable at a molecular level from fossil fuel based polypropylene and polyethylene. It is interesting to note that Braskem is putting on a billion pound annual capacity plant in La Porte, TX.  Their feedstock choice ?  Fracked American natural gas, not ethanol derived from sugar cane.  Their CEO praised the American shale gas feedstocks.

In the US, most plastic is made from natural gas.  The resin producers simply take what they want from the natural gas pipeline and put the rest back.

PVC ( # 3 ) is a combination of ethylene and chlorine salt.

The other choice of feedstock is naptha.  Naptha is the creme de la creme of a barrel of oil which cannot be refined into gasoline or motor oil.  It is the natural choice for feedstock for oil refineries.  In the olden days, they used to flare the by products off.   Any correlation to oil saved by not using plastic is false.  Anyone who makes this claim has no idea what they are talking about. 

So it is true that some plastics, not all plastics, are made from oil.  It's just feedstock choice.


These items could all have been derived from oil or natural gas.  Display courtesy of Ocean Star Drilling Rig Museum in Galveston, TX. 

Here is a decision guide I put together to capture the ramifications of plastics made from different feedstocks:  

Perception is reality.  Fact checking is obsolete.  Feel good press releases such as this one from Subway play into the public's ignorance about where plastics come from:   Lego bought into Braskem's marketing message and in turn duped the general public. 

Remember freshman econ about factors of production ?  Where plastic is made and what plastic is made from influence the cost of plastic.  The major factors are feedstocks and exchange rate. 

Like it or not, the US is poised to once again become the low cost producer of volume thermoplastics.  Thank you, George Mitchell !     For polyethylene alone, there is an additional 25 billion pounds of annual capacity going on stream by 2021.  Plants are not located in the traditional gulf coast.  They are sprining up in Oklahoma, West Virginia and Alberta.  In the US, we put the plants right on top of the gas domes.  The gas is purchased on "contract", or simply settled monthly.  This gives the US an advantage over some areas where it must be transported and purchased on what is called "spot " which is vulnerable to price variations.  These are not projects which have a 5 to 10 year investment recapture.  They are more along the lines of 40 to 50 year life.


How plastics degrade is the other side of the coin.  There are a lot of misperceptions on this subject.  
With the exception of PVC, most plastics degrade back into their harmless monomer building blocks.   It doesn't take millions of years; more like a half life of hundreds of years.  This will be a problem for future generations when the toxic chemicals largely from households start to leak into the water table.  Fortunately the plastic landfill liners will protect the environment for a few hundred years. 


The author in front of Lyondell Chocolate Bayou resin plant in Texas with examples of natural gas derived high density polyethylene ( HDPE ) products.  

For a discussion of why plastic recycling rates are so low, watch this video. 

Read More

Topics: what is plastic made from ?, plastic made, plastic from oil

Plastics in-depth and insights


Plastic Blogs

Subscribe by Email

Most Popular Posts

Browse by Tag