PW Español




PW Live



Very usefull links



PW
Bookstore





Institutional
links


OPEC







PW
Business Partners

 


IRAQ OIL THE FORUM

 


Blogspots

The Global Barrel

Tiempo Cultural

Gustavo Coronel

Iran Watch.org

Le Blog des
Energies Nouvelles

News Links

AP

AFP

Aljazeera

Dow Jones

Reuters


Bloomberg

Views and News
from Norway

 

 

 


Editorial/Opinion

 

David Brodwin: Who benefits
most from plunging oil prices?



The Winners and Losers of Cheap Oil

With the price of oil settling in at around $50 a barrel, down roughly half since last summer, it's time to ask what the drop means for sustainability. It may seem like an easy question. After all, with oil so cheap, it's harder to make the business case for renewable energy. But the situation is not as simple as that.

There's no question that that cheap oil creates winners and losers. Airlines win big, since jet fuel is a big part of their operating cost. Fertilizer manufacturers and other chemical companies win big, since they use oceans of oil to make their products. The oil companies themselves lead the list of losers, along with companies that make drilling equipment and provide services to the oil industry.

At the same time, cheap oil lets some nations win big, while others suffer badly. Most of the oil exporting countries can't sustain their government spending with oil at $50 per barrel, so we can expect some sharp belt-tightening and even dangerous political instability. For example, Russia needs a price of about $105 per barrel roughly twice the current level to keep its economy on track. At the same time, cheap oil helps the economies of countries like Japan, which need a lot of energy and have little or no domestic supply of their own. If oil stays cheap, then some of the countries that the U.S. has battled to contain (like Russia and Iran) become less of a threat. Then we can spend less on defense and more on things that improve the quality of our lives.

The impact of oil on environmental sustainability is not so clear cut. With oil cheap, it's harder for renewable sources like wind and solar to prove their cost-effectiveness. But on the plus side, cheap oil means a lot of expensive and marginal oil production will get shut down or never developed in the first place. First and foremost, cheap oil makes the Canadian tar sands moot. Tar sands oil is not economically feasible unless the price of oil is above $100 or so per barrel if the oil has to be shipped by rail, and might work out at $75 per barrel if a pipeline were built. But at $50 a barrel, it's dead on arrival. Similarly, environmentally-risky deepwater exploration and development doesn't pencil out at $50 per barrel.

Cheap oil will slow the growth of fracking (hydraulic fracturing), one of the more problematic sources of energy. Many environmentalists are sharply critical of fracking; it is poorly regulated, and some fracking sites leak methane, a powerful planet-warming gas. Also, fracking operations inject contaminated water into the ground where it mixes with and pollutes the local drinking water. But today's low oil prices will likely slow the growth of fracked oil, because many fracking operations are just not economical at oil prices below $75 per barrel.

In addition to taking some of the dirtiest fuels off the market, today's low crude prices promote sustainability in other ways. Low prices today set the stage for price volatility in the future by putting a tourniquet on investment in oil production. Industry output will fall, slowly at first and then more quickly as older, failing facilities are not replaced. We will reach the point when a small hiccup in the supply, particularly if it happens when the economy is on an upswing, can send the price soaring again. That hiccup will inevitably come when the recession ends in Europe and elsewhere. Then energy demand will rise, and with production capacity diminished, prices will spike. This price shock will spur more companies to pursue options that reduce their exposure to price volatility. And that means turning once again to fuels that are free.


David Brodwin is a cofounder and board member of American Sustainable Business Council. Follow him on Twitter at @davidbrodwin . Petroleumworld does not necessarily share these views.

Editor's Note: This commentary was originally published by US News and World Report /economic-intelligence, March 9, 2015. Petroleumworld reprint this article in the interest of our readers.

All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld.

Use Notice:This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of environmental and humanitarian significance. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.

All works published by Petroleumworld are in accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.Petroleumworld has no affiliation whatsoever with the originator of this article nor is Petroleumworld endorsed or sponsored by theoriginator.

Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law.

If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Internet web links to http://www.petroleumworld.com are appreciated

Copyright© 1999-2009 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors.Internet web links to http://www.petroleumworld.com are appreciated

Petroleumworld welcomes your feedback and comments,
share your thoughts on this article, your feed. back is important to us!

Petroleumworld News 03/13/2015

We invite all our readers to share with us
their views and comments about this article.
Follow us in : twitter / Facebook
Send this story to a friend Write to editor@petroleumworld.comBy using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8 +/ 800x600 pixels



 


 

 

TOP

Editor & Publisher:Elio Ohep F./Contact Email: editor@petroleumworld.com

Contact:
editor@petroleumworld.com/ phone: Office (58 212) 635 7252,
or Cel (58 412) 996 3730 / (58 414) 276 3041 / (58  412) 952 5301


CopyRight © 1999-2010, Elio Ohep F.- All Rights Reserved. Legal Information

- CCS Office Tele
phone/Teléfonos Oficina: (58 212) 635 7252

PW in Top 100 Energy Sites


Technorati Profile


CopyRight © 1999-2010, Elio Ohep F. - All Rights Reserved.
This material may not be published, broadcast, posted online, rewritten or redistributed by any type of means, except with permission of the author/s

The information in this web site is proprietary and is protected under United States and International Copyright and Trademark laws. No part of this web site may be reproduced or transmitted in any form by any means whatsoever, except with permission of the author/s..

Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law. If you wish to use copyrighted material from this site for purposes of your own that go beyond
'fair use', you must obtain permission from the copyright owner.
Any use of this site or its material, in any form, without the express prior written consent of the author, is prohibited by law and is subject to legal action. Legal Information

Top 100+

Technorati Profile
Fair use notice of copyrighted material:

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from Petroleumworld or the copyright owner of the material.