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The price of oil is now under $70 a barrel after OPEC decided it would not cut back production significantly in the months ahead and the latest OPEC move suggests that it isn’t going to reverse course anytime soon.. Now Neil Irwin reports in the NYT that the falling price of oil looks likely to be one of the dominant forces shaping the global economy in 2015. So who wins and who loses? Winner: Global consumers as anybody who drives a car or flies on airplanes gets lower prices for gasoline and jet fuel. Loser: American oil producers - One of the big open questions is just how many of the small, independent producers in the American heartland will still be viable with oil prices in the $60s rather than the $100s. Many have relied on borrowed money, and bankruptcies are possible. Loser: Vladimir Putin - Russia’s economy is already facing its sharpest challenges in years, as Western sanctions imposed after Russian aggression toward Ukraine crimp the nation’s ability to be integrated in the global economy. Russia is a major energy producer, and the falling price of oil compounds the challenge facing its president, Vladimir Putin.
Potential Loser: The environment. As a general rule, the cheaper fossil fuels become, the more challenging it will be for cleaner forms of energy like solar and wind power to be competitive on price. But solar and wind power are sources for electricity, whereas fluctuations in oil prices most directly affect the price of transportation fuels like gasoline and jet fuel. Unless or until more Americans use electric cars, they are largely separate markets, so there’s no reason that cheaper oil should cause a major reduction in investment in renewables. The average pump price of a gallon of regular gasoline in the United States was $3.12 this week, down from $3.80 in October 2012 and down from $3.70 just four months ago. In the past, cheaper gasoline has two environmentally problematic effects: It leads people to drive thirstier cars and trucks and to drive them more miles. This time may be different. The number of miles Americans drive per capita has declined for nine straight years dropping from roughly 10,100 miles in 2004 to about 9,400 miles in 2013. A change that significant suggests a change in lifestyle—one that would be hard to upend. In addition, the average fuel economy of new cars and trucks sold in the United States has increased markedly over the past decade—in contrast to the 1990s, when new-vehicle fuel economy essentially flat-lined. Today, the average new car sold in this country goes 36 miles on a gallon of gasoline, up from 29.5 mpg in 2004. "Times have changed since the dawn of the last era of cheap oil," says Jeffrey Ball. "Even assuming low oil prices are the new normal, a cleaner energy system probably is too."
(Score: 0) by anubi on Monday December 01 2014, @07:47AM
Its going to be really hard to convince anyone next go-around if there is another energy crisis.
The ones who drank the kool-aid last time got hammered pretty good. I gotta admit I fell for it. Big-time.
I feel what took the biggest hit was the credibility of the institutions which were trying to warn us of this. Now they are seen as chicken-littles. Even the President of the United States got in on the act, and now the credibility of his office is now regarded with skepticism.
Now, just how many of our tax dollars went to fund "Cash for Clunkers", which effectively removed a lot of perfectly usable vehicles from the used-car market by having the taxpayer buy them then pour sodium silicate in their engine to render them useless?
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 3, Informative) by frojack on Monday December 01 2014, @08:36AM
Well admittedly, the Peak Oil nut jobs were all wrong all along.
But that doesn't mean that those things that were put in place over all these years were not at least partially responsible for the cheaper gas prices.
Gas mileage is up, Utilization is down. Its down so much that State and Federal gas taxes are no longer sufficient to pay for highway maintenance. Say what you will about cash for clunkers it did improve fleet average mileage, and since the vehicles were all recycled, the actual waste was very small.
Oil is pretty much totally retired as an electrical generation source. Even heating with oil is down. Gas is up.
Wind farms are sprouting from every mountain ridge.
We've exhausted much of the easy oil, and we are going after the harder to get oil.
So don't be too surprised when the shortage re-appears. It is inevitable.
No, you are mistaken. I've always had this sig.
(Score: 1) by anubi on Monday December 01 2014, @09:00AM
Looking in hindsight, you are dead-on.
I remember how it was at the farm, when the water table dropped.
We always got more water in the next year's rain.
However, from what I understand, petroleum was made in geological time, and from what I understood, we were burning it like a wild party.
It sure looked like that party was coming to an end when the booze bottles ran out.
I was preparing for one helluva hangover.
I thought Saudi Arabia was watering out.
I was following Matthew Simmons [wikipedia.org] like a lot of religious people follow their preachers. I had even worked in a major oil company's research lab and still remember numerous discussions of impending doom... I thought it was coming true.
I swallowed it hook, line, sinker, fisherman, boat, motor, and tackle box.
Most of the time I feel the way I did about this, I was right.
This time I was dead wrong. I never thought I would ever see sub $100 oil again. Ever. I did not think we had enough oil left on this planet to pull this off.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 4, Informative) by zocalo on Monday December 01 2014, @09:59AM
We don't, at least not that is readily accessible with simple and cost effective techniques - hence the use of approaches like fracking. Peak Oil was never supposed to be about actually running out of oil, it was about reaching a point where the cost to extract it exceeded the point where it was worth doing so - a simple return on investment calculation. And it's that RoI that the smarter analysts seem to be fingering as the real reason behind why the prices are plummetting.
The story glosses over it, but the secondary issue here isn't so much the per barrel cost being $80 as that this is far below what many OPEC members can sustain as thier per barrel costs much higher than that - most notably in the case of Iran - and those nations would absolutely like a cut in production to drive the prices back up again. This isn't about suddenly having a surplus of oil as it is about squeezing political and economic rivals, and maybe gaining more control of the market when things shake out. The numbers are vague and vary from source [cnn.com] to source [wsj.com], but it seems pretty clear that the only reason that this price point is sticking is because some of the cartel are voting for it because it's harming their competitors much more than it is themselves.
UNIX? They're not even circumcised! Savages!
(Score: 2) by Geotti on Monday December 01 2014, @11:54AM
and maybe gaining more control of the market when things shake out.
Like marginalizing the shale market.
(Score: 0) by Anonymous Coward on Monday December 01 2014, @03:09PM
Over 100 oil was not about demand in the way you think. Sure china and america are huge. But our demand was not growing at 400%.
http://charts.gasbuddy.com/ch.gaschart?Country=Canada&Crude=t&Period=132&Areas=USA%20Average,,&Unit=US%20$/G [gasbuddy.com]
But most of what you saw was a speculation bubble. Between 2000-2004 actual demand doubled? I doubt that. Then between 2006-2008 it quadrupled again?
We were NOT using that much oil and not pumping less. Amounts used show a much different chart. It was estimated at one point nearly 70% of the oil demand was actually monetary derivatives. These guys just came off a .com bubble and wanted to park the money somewhere 'safe'. Then in 2006 when the housing bubble started taking off they were hedging those houses against 'safe investments', bonds, gold, and you guessed it oil. You saw the same bubbles in those commodities. Bonds busted because the gov had to step in and do something for the mess they made (which ironically created the two bubbles in the first place). Oil and gold kept going. When you see gold hit about 400-500 it will be back within historic norms. Oil will need to be somewhere around 50-60 a barrel to be in the historic norms.
The people who will really suffer are the expats and indentured servants in places like dubai. The oil sheiks are not a sharing kind of people when it comes down to them vs some foreigner.
People seem shocked that our oil prices are manipulated. They have been manipulated since the 1930s (we elected presidents on the idea of busting up the oil cartels). Then again in the 1970s when opec rose to power.
You are seeing infighting in opec because they are not the 80% supply anymore. They now have to compete with their former customers. Their customers remember the price gouging for nearly 40 years.
It is funny I have been saying it since 2006. Oil is overpriced for the amount pumped and levels of actual demand. It is like my cable company charging me 60 a month for internet. Yet they deliver it to me for about 5. I pay it because they are basically the only game in town not because I think they are building better infrastructure. They are busy putting in executives pockets.
(Score: 2) by VLM on Monday December 01 2014, @01:30PM
I think the lesson is real economic declines are never hollywood smooth. They're all jumpy. Stock market bear markets are like that. The housing bubble still hasn't popped all the way back to normal, talk about a ridiculously overpriced sector by any historical model. Company declines/implosions. Most financial crisis are like that.
That doesn't mean the empty wells in TX and the north sea, or almost empty wells in MX and SA, are somehow going to magically refill in anything less than millions years. You got a finite pool of oil and when the pool gets near enough to empty, that's it, no matter how much financial sector magic you sprinkle on it.
(Score: 2) by DeathMonkey on Monday December 01 2014, @07:11PM
Well admittedly, the Peak Oil nut jobs were all wrong all along.
Given a finite amount of oil it is impossible for there to not be a peak. Do you contend that oil is actually infinite?
(Score: 2) by urza9814 on Wednesday December 03 2014, @02:39PM
I'm not sure that infinite oil is quite as absurd as it sounds.
When prices go up, new production methods become practical. Or when efficiency of these new methods increases to a sufficient level. We're seeing that with tar sands for example -- it's only worthwhile because oil is expensive and because the extraction process has gotten much cheaper. As time progresses we certainly *could* keep discovering new methods of production and never quite hit that peak. After all, we could theoretically produce synthetic oil from atmospheric CO2 and close the cycle eventually.
If we weren't constantly finding new ways to produce the stuff, we might have hit peak oil more than a century ago. But at this point peak oil may be more about it becoming obsolete rather than extinct.
(Score: 2) by sjames on Monday December 01 2014, @05:06PM
Actually, this is a demonstration of the effectiveness of conservation efforts coupled with new production techniques to stretch the existing supply. It's no surprise that falling demand with increasing ability to get at less than prime supplies drove prices down. That doesn't mean depletion is gone forever, it just stretches the time line.
A nice additional effect is that it puts a cap on just how much nutzery from oil producers the world has to put up with.