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
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.
A recent briefing note and press release by the Institute for Energy Economics and Financial Analysis (IEEFA), warns that without enforceable trade measures covering plastic raw materials, the global treaty risks being ineffective.
Another chemical plant in Louisiana has indefinitely suspended all production following dire financial results, the facility’s operators announced in mid-May.
The Denka Performance Elastomer plant in St John parish has long been associated with chronic air pollution issues. This is another example of the challenges facing the petrochemical industry.
On May 2, 2025, Air Products announced the suspension of it $4.5 billion Louisiana Clean energy Complex, a significant retreat from the state’s energy sector. The Acesnsion Parish facility was hyped as producing blue hydrogen-to-ammonia and capture and sequester 5 million tons of CO2 annually.
The decision to stop investment comes on the heels of local opposition including moratoria on seismic testing and injection wells, both critical components of the project. Although a federal judge struck down the moratoria, residents expressed fears over potential contamination of Lake Maurepas and broader environmental impacts.
Since 2024, Air Products has withdrawn from several significant US-based projects including projects in California, New York, and Texas. The withdraw of Air Products from these projects continues to show that petrochemicals are a risky investment.
Mitsubishi has announced that it has resolved to terminate consideration of a new methyl methacrylate (MMA) monomer plant in Geismar, Louisiana. Many of the reasons the company cited for doing so were first detailed in IEEFA’s July 2024 report about the risks of the plant, which had already been delayed at the time of the report.