How Shale Gas is Leading to Lower Prices on Plastics

Not only is the discovery and abundant supply of Marcellus Shale gas good for consumers in the form of lower energy prices, it’s also good for consumers in the form of lower prices for products made from plastic. An article in Plastics News highlights the importance of the shale gas discovery in the United States and its impact on the production and availability of plastics.

A brief petrochemical lesson: Methane is typically what people think of as “natural gas.” Methane is the stuff that burns cleaner than other carbon-based sources of fuel, like oil and coal. But when “natural gas” is mined from the earth, the second largest component by volume is a chemical called ethane. Somewhere between one and six percent of natural gas coming from the ground is ethane. Why is that important? Ethane can be converted to the hydrocarbon ethylene. Ethylene is the “feedstock” (or raw material) used to make most plastics, including polyethylene and PVC.

Polyethylene is the most widely used plastic in the world. Almost all plastic packaging, including shopping bags at grocery stores, the plastic wrap around a loaf of bread, even the plastic bag your frozen peas come in, is made from polyethylene. PVC (polyvinyl chloride) is another widely used plastic—particularly in construction of homes and businesses. It’s used in everything from pipes and flooring to insulation, roofing, and even upholstery and clothing.

Typically the ethylene used as feedstock in manufacturing plastic has come from naphtha, which comes from crude oil. As the price of oil goes up, so does the price of plastic. But now, with increasing supplies of shale gas and with it, increasing supplies of ethane converted to ethylene, the price of plastic is coming down.

These new natural gas economics already have had an impact on U.S./Canadian PVC, as low prices allowed producers in the region to almost double their export sales last year. That rescued PVC makers from what could have been a double-digit sales loss caused by the region’s struggling construction market.

At DeWitt & Co.’s World Petrochemical Conference, March 23-24, DeWitt President Earl Armstrong said that the new natural gas market is shaping the future of the North American petrochemicals sector.

“The U.S. is going to max ethane and is expected to stay there,” he said.

“North America will be able to compete for polyethylene export business because of shale gas and less capacity than expected from the Middle East.”*

Read the rest of the extensive and interesting article in Plastics News.

*Plastics News (Apr 5, 2011) – Lining the coffers with shale