How Low Oil Prices Negatively Affect Recycling

Over the last several decades, recycling has grown into an extremely prominent industry, not just in the United States, but also around the world. However, economics realities impact “feel good” green industries just as much as the worst polluting companies. Indeed, one common target for environmental reform, the oil industry, may actually be harming recycling as it suffers its own price collapse.

Over the last several decades, recycling has grown into an extremely prominent industry, not just in the United States, but also around the world. However, economics realities impact “feel good” green industries just as much as the worst polluting companies. Indeed, one common target for environmental reform, the oil industry, may actually be harming recycling as it suffers its own price collapse.

Recycling, just as any industry in a capitalist society, is based on the principles of supply and demand. If there is a lack of demand, there will be a surplus of supply, prices will drop, and this can ultimately lead to the collapse of the market segment. Thus, with oil prices crashing, the manufacturing costs for plastic and glass have also come down significantly.

While many were buying recycled plastic for the benefits to the environment (and the benefits this has on consumer opinion of a particular brand), this benefit is quickly being outstripped by the relative cost. Recycled plastic and glass is usually at least competitive with, if not less expensive than, original content. As oil prices collapse, the cost of the raw material for plastic, as well as the energy cost associated with making and shipping these products, has plummeted. Prices of these items become far cheaper than the prices of their recycled counterparts.

According to a report by CBS News, prices for all plastics have fallen about 20 to 30 percent compared with last year. Glass and plastic are also in the dumps, at rates as low as or lower than levels seen before the 2008 Great Recession. While oil is a major cause of the problem, the West Coast port strikes and slowdown in the Chinese economy (a major consumer of these materials for manufacturing) have both taken a toll. This has created a financial cyclone, destroying huge swathes of the recycling industry.

Keeping the recycling industry afloat, at least in part, is the requirement in many municipalities for recycling programs. These cities end up paying companies to haul away recyclables, even if those same companies are unable to resell them. This keeps at least a portion of the supply chain funded, helping to stymie a complete collapse of the industry, at least for now.

Unfortunately, with the recent volatility of oil prices, the recycling industry will likely have to hunker down for a long siege. If oil undergoes resurgence, it may bring recycling along with it. Hopefully, those in the industry will be able to weather the storm until then.