Petrochemicals: A Sector in Secular Decline
As the economics of petrochemicals weaken, sustainable solutions are emerging.
Oil and gas companies are betting big on the continued importance of petrochemicals to our daily lives. In fact, the use of petrochemicals in the medical, aviation and industrial sectors is causing these companies to make shaky investments in new production facilities to meet a perceived future demand. Some policymakers are also looking to the industry as partners to build local economies.
Here’s what investors, decision makers, and community leaders need to consider when a company proposes to build a petrochemical plant in their community:
The proof is in the projects
Anyone betting on the future of the petrochemical industry should take a careful look at recent trends. The pace of project delays and cancellations across the U.S. make it clear: trouble lies ahead for new petrochemical facilities.
A growing consensus
State and local communities, intergovernmental organizations, and even credit agencies are all reaching a similar conclusion: the world doesn’t need more petrochemical products.
The future favors innovation
As the economics of petrochemicals weaken, a growing number of sustainable solutions are emerging. Innovative companies and industries are developing alternatives that eliminate or greatly reduce the need for polluting, fossil-based feedstocks.
Petrochemicals Updates
Shell issued a fourth-quarter 2025 update note showing an expected loss in its chemicals and products division. Meanwhile, Shell's Pennsylvania petrochemical plant continues to face an unfavorable market and uncertainty.
Exxon Mobil announced on it would shut its Fife ethylene plant in Scotland in February 2026, saying the site is no longer competitive because of high supply costs, weak market conditions and the UK's economic and policy environment. This is further evidence of IEEFA's analysis showing petrochemicals in decline.
A new report found Shell’s petrochemical complex in western Pennsylvania has fallen far short of expectations. The plant was once projected to bring in $1.5 billion a year but cost more than double its original $6 billion estimate.
Written by Swathi Seshadri, Energy Specialist, Petrochemicals, South Asia, at IEEFA, this article highlights why an agreement on a global plastics treaty has yet to be reached, despite years of talks and why a strong treaty can protect citizens from the hidden costs of polymers and the economic and financial vulnerability resulting from overcapacity.
In an October 2024 briefing note, we warned that the secular decline of the petrochemical industry increases the risk that Shell's Monaca plant will struggle to meet financial targets, making it a less attractive asset than initially expected. This warning now appears prescient, as Shell discusses selling its only polyethylene manufacturing site in the world, which cost $8 billion more to build than initial estimates.
Poor plant economics, capital destruction, and competition from recycling made the plant a risky bet for investors, local and state governments, and Pennsylvania residents.