Last week we talked about the health impacts of fracking. This week we’re focusing on the economic risks, specifically inspired by a lecture from Patricia DeMarco, a Rachel Carson Scholar and Vice President of the Forest Hills Borough Council. The problem, Dr. DeMarco said that today we care more about the economy than we do the environment and society. When there’s an imbalance of interest between these three things, more issues arise, only one being the plastic issue we’re discussing this month.
There are six economic risks to fracking for companies making plastics according to Dr. DeMarco.
- Price: Revenue from plastic product sales is much lower than expected. When revenue is lower than expected, this is known as an unfavorable variance, which in short means that businesses are making less money. In 2010-2012, the price was about one dollar per pound. The 2021 forecast is expected to be from $0.4 – 0.6 per pound.
- Oversupply: Because federal and state subsidies (which is a sum of money given by the government to help businesses) encourage rapid development of shale plants, there is an oversupply of products. That in turn causes lower pressure on prices and projects to become cancelled or deferred.
- Competition: There are multiple companies in the market for fracking, including ExxonMobil, DOW, and BASF. Newer companies like Shale Petrochemical have a harder time finding their footing because giant companies such as the ones just mentioned can lower prices to maintain market share and keep their customers.
- Low-Cost Feedstock: Many companies are facing bankruptcies and financial stress due to competition and decreased demand. According to Dr. DeMarco’s presentation, 70% of shale gas and ethane producers are facing this right now because ethane can’t compete with naphtha based plastics from lower priced oil.
- Slower Growth: Plastic consumption is tied to GDP growth, which is expected to be 2% or lower for an extended amount of time because of COVID. Less consumption means less money for the companies making it.
- Recycling: Right now, there is a surge in awareness about the risks and effects of plastic which is decreasing the demand for single use plastics and new plastics made from ethane. Movements like the Single-Use Plastic bans Global Movement are only spreading this awareness.
When I first looked at this list, I wondered why companies would persist with fracking even though the economical benefits and the environmental benefits are clearly against them. The reason? Laws protect polluters. Companies still have a lot of financial gain because policies such as the Energy Policy Act of 2005 protect them with numerous exemptions and because we have failed to produce stricter environmental protections. If environmental controls are updated and enforced, 98% of all operating coal plants would be unprofitable. Think about that.
At the economic level, there’s not much one student can do because the only way to change is to make new laws and regulations. What we can do is make ourselves be heard by our representatives.
Our challenge this week? Look up environmental legislation in your area and email your representative about it. Did they help pass a bill that will fight against climate change? Or did they help the fracking companies lobby for more protections?