The Permian Basin is booming, with more oil and natural gas being extracted than ever before. But those resources are often used to manufacture plastic in factories near Houston, and some experts say demand for that plastic could drop in the next five years, especially as countries like China and India open new plastic plants of their own.
Chris Tomlinson, a business and economics writer for The Houston Chronicle, says the industry has overestimated consumers’ desire for plastic. He also says the environmental effects of things like nurdles, plastic trash heaps in the ocean and plastic in landfills, is bothering consumers enough that they’re looking for alternatives.
“The problem is the industry has got ahead of itself and built more capacity than there is a demand for,” Tomlinson says. “You have this global movement away from plastic, calling for bans and boycotts.”
Tomlinson says if consumer demand for plastics continues to drop, there will be huge effects on the oil and gas industry. And if the industry doesn’t make immediate changes, cities like Houston will eventually have to deal with mass layoffs and reduction in available hours for the workers that stay, Tomlinson says.
“You’re going to lay people off, there are 68,000 who depend on the petrochemical industry for their jobs in Texas…” Tomlinson says. “The bigger challenge is going to be for the oil and gas industry who produces the raw materials to say to themselves: ‘Hey maybe we’re not going to have as much demand for our product as we think and maybe we need to scale back our future plans.’”
The oil and gas industry should be turning its attention to innovation and diversification – making products other than plastic – because as of now, they’re not, Tomlinson says. Five years is enough time. Oil and gas companies should follow the example of companies like Norway-based Equinor in finding alternative sources of energy like hydrogen, he says.
“What we have to stop hearing during these quarterly earnings calls are the oil and gas industry and oil and gas companies saying ‘oh we’re going to be OK. Electric cars aren’t going to hurt us because we’re going to sell more petrochemicals,’” Tomlinson says. “Well guess what? I don’t think we are.”
Written by Marina Marquez.