Volatile world oil prices are nothing new, but recent changes in oil and gas demand could be leading toward an era in which oil is optional, writes ex-Sierra Club executive director Carl Pope.
With supplies growing, demand falling, a new generation of energy-efficient vehicles on the horizon, and average vehicle miles travelled declining, “the International Energy Agency estimated that roughly 2.6 million barrels a day is now, in investment terms, stranded—priced too low to repay the capital spent developing it,” Pope writes. But major oil producers like Iran, Iraq, and Venezuela “desperately need to keep pumping oil to cover their budgets.”
In the U.S., meanwhile, rapid depletion of shale oil wells has some analysts worrying “that the junk bonds that supported the U.S. drilling boom are now a threat to markets.”
Oil as a transportation fuel will be with us for decades, Pope says. But “if big oil importers—China, Europe, India, Japan and the U.S —accelerate their efforts to break oil’s monopoly as a transportation fuel, global consumption will decline even in robust times, fostering a virtuous cycle: Cutting oil’s price to $60 a barrel from $120 a barrel amounts to a trillion-dollar economic boost for oil-importing nations.”