Happy fall from the North America team! It's hard to believe 2026 is almost at an end—to say it has been an eventful one would be an understatement. Throughout the year, we've seen energy markets around the globe become more interconnected.
One area where this is especially true is the petrochemicals market. Increasingly, big oil and gas companies are using petrochemicals to diversify their portfolios, often inventing the market in the process. (Do you really need your individual produce items wrapped in plastic?) Despite their efforts, the global petrochemicals industry is in an extended period of financial underperformance driven by oversupply and limited demand. Investors in the petrochemical industry would be wise to take note that a disappointing long-term forecast for demand growth is currently clouding the industry's outlook.
Disappointing returns don't stop at a company's bottom line, either. Communities in Texas that were promised an economic boom in exchange for petrochemical facilities have failed to see that reality materialize. Lower median incomes, slower population growth, and less job growth coupled with higher city debt levels per person, higher unemployment, and higher poverty levels are characteristics of petrochemical cities during this time of industry expansion, contrary to industry claims to economic improvement.
As you'll see in this edition, IEEFA has been showing for years that the petrochemical industry is not the market savior that was promised. Now, we need to make sure investors and decision makers take note.
This will be our last North America update of 2026. I hope you have a healthy and restful holiday season and we'll see you again in 2027.
The petrochemical renaissance has not only failed to materialize in Texas—it has also failed to deliver in Pennsylvania. The state invested substantial government funding and tax credits in a Dutch-based international corporation’s petrochemical project (the Shell Polymers Monaca plant) in an attempt to help launch a “petrochemical renaissance” in the state. It didn’t work. The failure of Pennsylvania’s economic development initiatives to spur more private investment in major petrochemical developments—despite the ready access to natural gas liquids as feedstock—is a red flag. In our June report, we examined the limited role of the petrochemical industry in Pennsylvania’s economic growth and jobs generation profile. The results make it hard to justify any more public incentives for the industry.
Another arm of the petrochemical portfolio is ammonia, but this market also faces significant challenges. Federal, state, and local agencies have been awarding financial incentives for construction of ammonia production plants that may fail to achieve robust economic benefits for host communities. Government agencies typically justify awarding tax incentives, grants, or other support based on company predictions that a project will produce many jobs and bolster the local economy. This report explains why ammonia production is limited as a job engine; why energy markets for ammonia will not likely be robust; and why public funds and tax benefits should not be invested in ammonia, given the risks of such enterprises.
As the oil and gas industry looks to diversify revenue streams, the industry is frequently looking to petrochemicals and the plastics made from them to bolster profits. Our report from last year lays bare how fragile relying on single-use plastics (SUP) is as a long-term plan. On a global scale, the petrochemical industry is facing headwinds as weak economics and low demand translate to financial instability. This report examines what a reduction in single-use plastics would look like for the industry, and the results are stark: A 70% reduction in the production of SUP would result in a $138 billion loss. This reduction would avoid roughly 3.85 million barrels per day of oil consumption, highlighting the shakiness of the industry.
Webinar recordings
Texas petrochemical expansion lacks rewards for host cities Promises of better economic conditions and new jobs have failed to materialize in the Texas cities along the Gulf Coast, where a wave of petrochemical expansion has occurred over the last 15 years. Lower median incomes, slower population growth, and slower job growth, coupled with higher per-capita city debt, greater unemployment, and increased poverty characterize petrochemical cities during this period of industry expansion—contrary to industry claims of economic improvement. Catch up our webinar from September when we dove in on the details of our report.
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Shell’s fourth-quarter earnings highlighted that the company’s chemicals division—and particularly the Monaca petrochemical complex—continues to destroy value. The $14 billion Monaca facility in Pennsylvania, which cost double its original estimate, is the centerpiece of this failure. Shell must move beyond “fixing and repositioning” and pivot toward “rationalizing and exiting” this segment to protect shareholder returns. This is not a cyclical blip. It confirms a structural problem. The company’s chemical business revenue declined 43%, from $16.98 billion in 2021 to $9.60 billion in 2024. The deterioration has continued into 2025, with revenue falling to $7.82 billion, a cumulative decline of 54% from 2021 levels.
Quotable
“China's emergence as a reseller of surplus LNG exposes the fragile assumptions underlying the current wave of LNG export investment. For those looking to offload LNG over the coming decade—from traditional exporters, marketers, and portfolio traders to emerging merchant buyers—China, the world’s largest LNG customer, could increasingly become one of their most significant competitors.”
“Petrochemical investments carry long-term risks that merit careful consideration from development finance institutions. These are long-lived assets in a sector that faces overcapacity, stressed margins, and feedstock supply disruptions. When projects are located in economies with limited fiscal space, or are backed by World Bank Group (WBG) guarantees, those risks can ultimately fall on governments and their citizens. We encourage WBG to assess their investments in this sector against its Paris-alignment commitments with the same rigour it applies to upstream oil, gas, and coal.”
Swathi Seshadri, Energy Specialist, Petrochemicals, IEEFA South Asia
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