ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Global plastics purge to hit oil investors

Ecowarriors could have double the reason to celebrate the global push to eradicate plastics after Legal & General Investment Management highlighted the negative impact lower demand will have on the oil and petrochemical sectors.

The tragic death of marine life highlighted by BBC documentary Blue Planet II galvanised the world to ramp up its efforts to ditch single-use plastics.

But few people realise that oil is a key component of plastic.

If less plastic is being made, there is less demand for oil – less demand equals lower prices and/or output.

So, what does that mean for investors?

Light, cheap and deadly

At a briefing on Wednesday, LGIM fund manager Nick Stansbury highlighted that the demand for plastic has grown 20-fold in the past 50 years and is expected to double again in the next 20 years.

“Plastic’s durability and chemical make-up is killing untold numbers of sea creatures, fish and birds,” he said.

“Nearly every government has committed to reducing plastic usage in response to this global problem.”

With that in mind, Stansbury looked at the key implications of the global clean-up for investors, petrochemical companies and the demand for oil.

Petrochemical companies

The petrochemical industry has a combined market capitalisation of more than €1.7trn ($2trn).

This sector is currently engaged in a large capital spending programme, building new chemical plants all over the world, many of which have expected economic lives of 30 years or longer.

If consumer demand for plastics grows more slowly than the industry expects, it would suffer from global overcapacity, which could potentially significantly affect profitability for this very capital-intensive industry, Stansbury warned.

What does it all mean?

Petrochemicals demand accounts for around 6% of the current total demand for oil and is rising in importance.

Despite this, a major global agency paid scant attention to the subject in its recent long-term outlook report on energy demand.

For most forecasters, as long-term demand for oil used in transportation and power starts to slow down in favour of renewables, petrochemical demand becomes a very important component of total oil demand growth.

For example, in the latest BP Energy Outlook, petrochemical demand growth will make up 40% of all end-use demand growth for oil by 2035.

Given the sensitivity of these forecasts to many small changes in assumptions, such as how many electric vehicles are sold in the intervening period, what happens to petrochemical demand globally matters a lot more than people might currently think.


Oil demand growth has historically played an important stabilising role in rebalancing markets when they become oversupplied, said Stansbury.

However, investors should recognise the risk that long-term oil demand growth cannot be relied upon as plastic and oil consumption is dramatically reduced.

“We cannot pinpoint when peak oil demand will arrive, but we are sure it will happen,” he said.

“The destabilising effect on oil markets will be profound and we believe that investors, and oil companies, need to start taking those risks more seriously.”

For more insight on international financial, planning please click on


  • Can M&A and buybacks breathe life into UK market?

    Can M&A and buybacks breathe life into UK market?

    Both buybacks and M&A should help realise value in UK shares, boosting prices and giving investors another reason to consider the UK stockmarket Not only does M&A activity appear to be picking up, with a high-profile bid for UK electronics retailer Currys, but the scale of company buybacks continues to accelerate. If it goes well,…

  • Capital Group launches multi-thematic Article 8 funds

    Capital Group launches multi-thematic Article 8 funds

    Capital Group has launched a set of multi-thematic sustainable funds that are available for investors in Europe, writes Christian Mayes. The Capital Group Sustainable Global Opportunities fund (LUX) will invest in global equities, while the Capital Group Sustainable Global Corporate Bond fund (LUX) will target fixed income exposure. The launch also includes a multi-asset offering…

  • Bond funds pull in €29.7bn in January – LSEG

    Bond funds pull in €29.7bn in January – LSEG

    Bond products were the best-selling asset class in January, according to LSEG Lipper’s European Fund Flow report, writes Christian Mayes. The asset class pulled in a net €29.7bn in the month, while Money Market USD grouping was the best-selling Lipper Classification after receiving €11.2bn inflows. Providers of mutual funds pulled in €22.5bn, while passives saw net…

  • Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    A quarter of all Article 8 funds could be accused of greenwashing based on their sustainability framework and practices, according to MainStreet Partners, writes Christian Mayes The 24% of funds classified as a greenwashing risk by the 2024 ESG Barometer report marks a four percentage point increase from the 20% flagged at the end of…

  • EU green rules could stymie decarbonisation projects – ExxonMobil

    EU green rules could stymie decarbonisation projects – ExxonMobil

    The European Union’s climate regulations may lead to it halting its investments in Europe, ExxonMobil has warned. Speaking to the Financial Times, Karen McKee, president of the product solutions division, said the oil and gas giant had struggled to begin decarbonisation projects in Europe due to the regulatory burden. The result, she added, was that…

  • ICE flags need for Europe to double green investment

    ICE flags need for Europe to double green investment

    Investments to modernise energy and transport must double by the end of the decade to reach 2030 climate targets, the EU has been warned. According to the Institute for Climate Economics (ICE), which has released the European Climate Investment Deficit report, the bloc lacks what it calls a “consistent tool” to ensure monitoring of the…