Low oil prices adversely affect recycling efforts. How does that happen?

Plastic bottles that hold our favorite soft drink or choice of bottled water contain an input called Polyethylene Terephthalate, or "PET".

One of the inputs used to make PET is crude oil.  However, once PET is created it can be reclaimed through the recycling of plastic bottles and used over and over and over again...

Producers of plastic bottles have a choice between using newly produced "virgin" PET or recycled PET made from plastics recovered from re-cycling programs across the US.

When crude oil prices are high, virgin PET is more expensive to produce and recycled PET has a competitive price advantage.

The recent plunge in crude oil prices has eliminated that advantage, and then some:

Recycling Becomes a Tougher Sell as Oil Prices Drop The fall in oil prices has dragged down the price of virgin plastic, erasing recyclers’ advantage

"...At the start of this year, new polyethylene terephthalate, a type of plastic widely known as PET and used to make soft-drink and water bottles, cost 83 cents a pound, according to data compiled by industry publication Plastics News. That was 15% higher than the cost of recycled PET. 

As of late March, the cost of new PET had fallen to 67 cents a pound, or 7% less than the recycled form, which costs 72 cents a pound...."---(Wall Street Journal)

Here is a graphic from the article that illustrates the change in price over time.  When the BLUE line is above the RED line, it is more cost effective to use recycled PET.

This turn of events in the crude oil markets has had a negative affect on the recycling industry.

"...Prices are “very important to stimulate good recycling rates among our communities,” saysCarey Hamilton, executive director of the Indiana Recycling Coalition.
Especially hurt are the middlemen of the recycling supply chain, who buy used bottles, cans, paper and other items and then use machinery to sort, bale and sell the recyclables. Prices middlemen get when reselling some types of plastic have plummeted by as much as half in just a few months, says Allan Zozzaro, a partner at Zozzaro Atlantic Coast Processing LLC in Passaic, N.J. “It’s putting a real strain on all recycling companies,” he says..."---WSJ

This example is a nice one to use in class to illustrate the microeconomic concepts of Substitute Goods in production, "Substitution Effect" vs "Substitutes", the difference between Quantity Demanded (or Quautity Supplied) and Demand (or Supply), and the power that prices hold over the allocation of societal resources.

E-waste, recycling and "good intentions". What happens when you hurt the people you are supposedly trying to help?

When viewpoints based on prior information (faulty or not) have been rendered obsolete why are we slow to change those views?

Is it because we have established a reputation based on those assumptions and to question would be to question our purpose?  I think this is more common than we think.

This opinion piece from Bloomberg suggests this is what it going on in the Electronic Waste (so called "E-Waste") industry and the negative environmental impact of E-waste is way overstated. 

I am not smart enough to know if this big picture story is true. But I am aware enough to know as a byproduct of sweeping policies to address a problem more often than not results in negative un-intended consequences.  Usually they are predictable but are not taken into consideration in the implementation of the policy.

"...This misunderstanding has led to several efforts at erecting partial export bans on U.S. electronics to developing countries, which -- other studies demonstrate -- import them as cheap and sustainable alternatives to new equipment. As a result, perfectly usable electronics are diverted into a recycling stream, where they are turned into raw materials, rather than into markets where they can be reused for years..." (Bloomberg) 

A conflict between "Reuse, Recycle" in triad of "Reduce, Recycle, Reuse" seems to have emerged. 

Interest groups have taken the "Seen" negative consequences of E-waste imposed on the few and put it above the "Unseen" positive effects that it may confer on the many.

Additional information tends to get in the way of our firmly held beliefs, doesn't it??

Do you know the difference between Trash and Treasure? Nice example of a good that went from one to the other in the marketplace, and it is found in your kitchen...

What is the difference between trash and treasure in terms of your refuse (fancy word for garbage)?  With trash YOU have to pay someone else to take it away.  With "treasure" someone PAYS YOU to take it away.  It is not a subtle difference.  Here is an example of a commodity that crossed over from the former to the latter:

""...Spent cooking oil. Used to be, restaurants had to pay companies to haul away their used cooking oil. In recent years, selling that yellow grease has become a half-billion dollar a year industry. So companies are now paying restaurants for the stuff. And that's pitting grease collector against grease collector..."" Source NPR

Tell me again, how much money do you RECEIVE from filling your recycling bin and putting it on the curb every week? We pay to have our recyclables picked-up. Do you ever ask yourself why? Seems like at a minimum, recyclers would pick it up for "free" from you if they can profit from it down the supply chain. I am willing to hear counter-points---let me have it.

Which is better for the environment, fake Christmas trees or real ones? The answer may surprise you...

Which is better for the environment, fake Christmas trees or real?  If you are trying to conserve trees, then fake is the way to go. But if you are trying to conserve resources overall and minimize your "carbon footprint", then the choice is not so clear...

NYTIMES:  How Green Is Your Artificial Christmas Tree? You Might Be Surprised

""Kim Jones, who was shopping for a tree at a Target store in Brooklyn this week, was convinced that she was doing the planet a favor by buying a $200 fake balsam fir made in China instead of buying a carbon-sipping pine that had been cut down for one season’s revelry.


“I’m very environmentally conscious,” Ms. Jones said. “I’ll keep it for 10 years, and that’s 10 trees that won’t be cut down.”


But Ms. Jones and the millions of others buying fake trees might not be doing the environment any favors.


In the most definitive study of the perennial real vs. fake question, an environmental consulting firm in Montreal found that an artificial tree would have to be reused for more than 20 years to be greener than buying a fresh-cut tree annually. The calculations included greenhouse gas emissions, use of resources and human health impacts.


“The natural tree is a better option,” said Jean-Sebastien Trudel, founder of the firm, Ellipsos, that released the independent study last year""

“You’re not doing any harm by cutting down a Christmas tree,” said Clint Springer, a botanist and professor of biology at Saint Joseph’s University in Philadelphia. “A lot of people think artificial is better because you’re preserving the life of a tree. But in this case, you’ve got a crop that’s being raised for that purpose.”

Reinforcement for me on the recycling lecture I gave in class this week---Nice quote... :)

How timely!!!...A great quote today in the Wall Street Journal in regards to an economist they profiled.  It is from his wife and is quite apropos to my spiel on recycling I gave in my AP classes this week.  It sums up what I think about the application of recycling, as opposed to the philosophy (two different things, in my opinion):

""He refuses to recycle," Mrs. Boettke says. "Something about how it actually uses more resources." He's not exactly a handyman either. "If his 'opportunity cost' is too great, he'll hire someone.""

The emphasis in the quote is mine....The "economic way of thinking" requires you to sometimes express an opinion that is contrary to conventional wisdom.  Don't forget the lesson from Bastiat---consider the unseen as well as the seen---be a GOOD economist... :)