Plastics and Oil

One result of low oil prices is the recycling of less plastic. Because plastics are petroleum-based products, companies that can only use recycled materials to produce new plastics, where oil prices have fallen sufficiently, become cheaper and recyclable areas become garbage dumps.

For the past few decades, recycling has become an extremely important industry worldwide. Indeed, the petroleum industry, a common goal for environmental reform, may suffer a reversal because it is experiencing its own price collapse.

Recycling is based on the supply and demand principles of any industry in capitalist society. If demand is deficient, there will be more supply, prices will drop, which will eventually lead to the collapse of the market segment. Thus, as oil prices fall, plastic and glass production costs will also decrease significantly.

While many buy recycled plastic for environmental benefits (and this is the benefits of a particular brand over the consumer’s vision), this benefit is quickly more affected than relative costs. Recycled plastic and glass are at least competitive, even if they are not expensive from the original content. As oil prices shrink, plastic raw materials and, in addition, energy costs have fallen as regards the production and transport of these products. The prices of these items are much cheaper than the prices of their recycled counterparts.

Keeping the recycling industry at least partially in part is a condition for many municipalities for recycling programs. These cities put an end to companies that pay to reclaim recycling companies, even if the same companies do not sell them back. This finances at least part of the supply chain, at least for the time being, by helping to prevent a complete collapse of the industry.

Unfortunately, due to the recent volatility in oil prices, the recycling industry will likely have to rule down for a long siege. If the oil is resurrected, it can bring recycling. I hope the sector will be able to blow up the storm until then.