Currently oil supply is up and the cost of oil has halved over the last 6 months. It’s largely down to a fracking boom in America, which has boosted their production by two thirds. There are all sorts of political and economic ramifications (far too many to pursue in this post!).
Some observations: Most of the writing on peak oil did not anticipate this. It significantly delays the “end of oil”. Although consumers get to enjoy (somewhat) lower energy costs, it is of course bad news because we’re going to burn all that oil and pump all that carbon into our overheated atmosphere (not to mention the environmental costs of fracking). We’re planting our collective foot on the accelerator as we speed towards the brick wall. Brilliant.
An interesting piece in The Economist recently imagines a bright side:
Seize the day
The fall in the price of oil and gas provides a once-in-a-generation opportunity to fix bad energy policies
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The plunging price of oil, coupled with advances in clean energy and conservation, offers politicians around the world the chance to rationalise energy policy. They can get rid of billions of dollars of distorting subsidies, especially for dirty fuels, whilst shifting taxes towards carbon use. A cheaper, greener and more reliable energy future could be within reach.
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There are growing signs that low prices are here to stay: the rising chatter of megamergers in the oil industry (see article) is a sure sign that oilmen are bracing for a shake-out. Less noticed, the price of cleaner forms of energy is also falling, as our special report this week explains. And new technology is allowing better management of the consumption of energy, especially electricity. That should help cut waste and thus lower costs still further. For decades the big question about energy was whether the world could produce enough of it, in any form and at any cost. Now, suddenly, the challenge should be one of managing abundance.
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The most straightforward piece of reform, pretty much everywhere, is simply to remove all the subsidies for producing or consuming fossil fuels. Last year governments around the world threw $550 billion down that rathole—on everything from holding down the price of petrol in poor countries to encouraging companies to search for oil. By one count, such handouts led to extra consumption that was responsible for 36% of global carbon emissions in 1980-2010. Falling prices provide an opportunity to rethink this nonsense.
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That should be just the beginning. Politicians, for the most part, have refused to raise taxes on fossil fuels in recent years, on the grounds that making driving or heating homes more expensive would not only annoy voters but also hurt the economy. With petrol and natural gas getting cheaper by the day, that excuse has gone. Higher taxes would encourage conservation, dampen future price swings and provide a more sensible way for governments to raise money.
Environmental authors such as Bill McKibben and Tim Flannery have also made the point that we need a period of energy transition – paradoxically we need a lot of energy to build the technologies that we we will need for a low-carbon, sustainable energy future. So the current glut of oil does seem to provide this opportunity.
The wisest thing to do, in my opinion, is leave the oil in the ground. The chances of that happening are nil. So will we at least have the wisdom to use the current glut constructively, to implement a transition to more rational energy policy and to more sustainable sources of energy? Can we actually, in the long term, cut emissions? Or will we squander it all on a brief boom, oil industry profits, and business as usual. I’m not optimistic.
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