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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: 2, Interesting) by Anonymous Coward on Monday December 01 2014, @11:19AM
Yes, global consumers are winners, but not just because they can drive around/fly for less money. Indeed, that should be the least effect (although the most obvious one). Global consumers win because the cheaper oil price essentially makes everything cheaper. For one, all your goods are transported around, and that transportation in included in the price. Next, many products contain plastics, which is made of oil. Cheaper oil means cheaper plastics, and thus cheaper products. Also, food should become cheaper because cheaper oil means cheaper fertilizer as well as less cost for driving all those agricultural machines. And of course, quite a bit of electricity is still made from fossil fuels, so also electricity should become cheaper.
(Score: 2) by VLM on Monday December 01 2014, @01:35PM
Global consumers win because the cheaper oil price essentially makes everything cheaper.
This makes the hilarious assumption the increase profit will result in lower revenue rather than higher profits on the balance sheets.
Remember, "fuel surcharges" and the like are only added and only go up, never removed or go down.
If you were willing to pay $100 for a flight last month, they're not selling the same seat for $80 next month out of the goodness of their heart, they're just going to keep the extra $20. We have regulations to keep competition out of the market, so no fears about that.
(Score: 2) by metamonkey on Monday December 01 2014, @07:47PM
No, they would not lower the price back down to $80 out of the goodness of their hearts. They would do it because their competitors lowered their price to $90 to capture more of the market. That's kind of how the market works.
All this only happens if the price of oil stays low for an extended period of time. Then the savings will eventually trickle through the supply chain to the consumer.
Okay 3, 2, 1, let's jam.
(Score: 2) by mrchew1982 on Monday December 01 2014, @05:59PM
With the impending changes the EPA are set to make I doubt that we'll see cheap electricity any time soon... All of the upgrades are going to cost some major coin.
We'll be better off with all of the changes, I agree, I just wasn't looking forward to paying for them!