If you’ve been to the gas station lately, you’ve probably noticed that the price of gas has gone down considerably from the beginning of 2015. You probably also know that the main reason for this is a drop in the price of oil. But oil prices affect much more than just how much you pay at the pump.

In addition to being refined into gasoline, oil is also used in the production of plastics. When oil is more expensive, it becomes more expensive to produce plastics. When the price is low, manufacturing plastics gets less expensive.

The cost of producing the plastic from which a product is made can affect how much those items sell for. As such, high oil prices often mean higher costs for consumer items that contain or are made of plastic. This also means that when oil prices go down, those items often go down in cost as well.

Unfortunately, low plastic prices also come with a downside. When the price of plastic is down, the returns for recycling plastic go down as well. When that happens, businesses and consumers are less likely to recycle their plastics, and recycling firms’ returns on the items they do recycle go down.

The drop in oil prices in the second half of 2015 has taken a toll on recycling. As virgin plastics and other oil-based products go down in value, so does the value of processing and reselling those products when they’re recycled. In Europe, several plastic recycling companies have filed for bankruptcy since the price of oil dropped.1

“Virgin plastic” is a term for plastic that is new, a.k.a. non-recycled. When the price of oil, and thus plastic, is high, many manufacturers favor using recycled plastics over virgin plastics because of the difference in price. Recycled plastic products are less expensive, and thus bring production costs down.

Now that the price of virgin plastic has gone down, the demand for recycled plastic is down as well. While recycled plastic can work just as well as virgin plastic in many cases, many companies prefer to buy virgin plastic because it is new, and therefore believed to be better. As such, the recycled plastic industry suffers when the price of oil is down.

How long the recycled plastic industry will continue to take hits in the marketplace is unknown. But as long as the price of oil stays low, the harder it will be for recycled plastic companies to sell their product, and the lower the prices they’ll be able to ask.

Polychem USA is a leader in the recycled plastics industry in the United States, transforming plastic scrap into useful items used by industry and consumers. Learn more by visiting www.polychem-usa.com.

1. http://www.plasticsnews.com/article/20150406/BLOG01/150409957/plastics-recyclers-suffering-pn-pricing-in-the-news