You have probably noticed that oil prices have tanked recently. Not long ago, oil was priced at over $110 a barrel and now it is below $27 a barrel – a 75% drop. It is expected to drop even lower to $10 a barrel in the near future. This is a major change from years of increasingly rising oil prices. With oil prices falling, there are serious problems for the world’s move towards sustainability.
Last month, the Organization of the Petroleum Exporting Countries (OPEC) – largely led by Saudi Arabia – decided to ramp up production in an effort to knock out its competition – such as the growing fracking industry in the US. At the same time, the Chinese economy is slowing down and demand for oil has plummeted. If that weren’t enough, the US government has lifted sanctions on Iran following a recent nuclear deal with them. Iran is now poised to begin exporting its own oil again. In short, oil is pumped at ever increasing rates, but there are fewer and fewer people asking for it – a strangely combustible mix.
What this mean for you and the world
More money in your pocket. There’s good news and bad news. The good news is that gas prices are cheaper saving you a few dollars at the pump. Those stuck in the snowy drifts of Snowmageddon (part 2) on the East Coast won’t have to break the bank to pay their heating bills. It also means that food prices will be cheaper, since oil is a major input (and cost) in the agriculture industry for everything from fertilizers to transportation.
Fewer Jobs. The downside is that the world economy is poised to take a major hit. Falling oil prices are sending chills down the spines of those on Wall Street and other financial markets. In the past when oil prices were low, economic activity was cheaper and companies were able to expand. But now financial markets are responding to the oil price decline as a signal for spiraling demand. Employment is expected to take a hit.
Climate Change. This one is a mixed bag. Those with short memories have rushed out to buy gas-guzzling trucks and SUVs as gas prices have tanked. Luckily, in many countries government regulations on emissions and fuel economy have been increasingly ratcheted up over the years, leaving these far less horrible for the environment than they used to be – although they still aren’t great.
Oil companies have also stopped investing in exploration for oil, with Royal Dutch Shell notably halting its exploration efforts in the arctic. This means the oil that we haven’t found yet will stay in the ground a little longer. Fracking has also taken a hit. Fracking is more expensive than gathering other fossil fuels, and many fracking projects are expected to be shuttered soon – welcome news to many champions of the environment. That’s great, but alternative energies are also going to take a hit and may not recover as quickly. Our efforts towards sustainability are in danger.
What you should do about it
If you are reading this, you probably aren’t one of our new SUV owners. Still, we often make decisions based on our wallets. Alternative energy technologies, such as solar panels and wind turbines, are going to start looking expensive in comparison to all of that cheap oil. But don’t be fooled like our friends in new SUVs. Oil might look cheaper now, but it isn’t likely to stay that way. In fact, history has shown us that after oil prices drop, they tend to be followed by a spike that lasts a while – it takes a while for oil companies to restart their oil exploration. In the meantime, their bank accounts grow huge as consumers suffer. This isn’t the first time this has happened, and if oil producers have their way it won’t be the last. If you want to avoid this, keep on track by investing in alternative energy and electric vehicles – that’s the road to the future.
Don’t stop there. Let your government representatives know that you expect them to keep moving forward into the 21st century. It would be a shame to lose all the momentum we’ve built because some Arab princes in a cartel decided to mess with the entire world for their own benefit. In fact, with all of the election campaigns going on, right now is the perfect time to demand that your representatives move our country away from supporting oil producers. After all, those oil producers consciously instigated the oil price drop for their own gain, not ours. It’s simply too dangerous for our economy and food prices to be tied to the decisions of a small group of people in a distant country who care little about us.
Divest, divest, divest. Oil producers may not get the message when we march by their headquarters demanding change or write articles like this one, but they understand the language of money. It’s time we sell our stocks in their companies and send them a message – we are moving into the future without them, and nothing they can do will stop us.
Finally, share this with your friends and family. If you care about your country and your community, help them understand why we should move away from our dependency on fossil fuels – especially now. Let them know about the game that oil producers are playing.
If oil producers want to play with us, well then game on!