It seems absurd that there needs to be speculation here. One would guess that oil consumption is measured not by price, but by volume. I don't see anything other than an increase in global consumption here. As the article mentions further on, it seems pretty clear that the Saudi's and some other OPEC members have decided that an increase in price means an increase in competition. I am sure they have competent mathematicians and economists that have decided, in the balance, it's best to pump more for less. That being the driver, rather than falling demand, it doesn't seem that this is bad for the global economy overall, aside from oil producers, and those that contract for them. Low energy prices could be good for growth.Still, as the oil price decline has continued, investors have increasingly seen it as a bad omen for the global economy. The drop may point to lower demand for oil and lower economic activity. And the decline suggests that policy makers have not managed to deal with the threat of deflation, or falling prices.
Low oil prices primarily punish Russia and Iran, both of which are currently under sanctions and both of which primarily export petroleum. People expected oil prices to continue to rise because people expected Saudi Arabia to throttle production. People forget that Saudi Arabia is a vassal state of American foreign policy and that punishing Russia and Iran is strategically beneficial to the United States. That's really all it would take: Saudi Arabia saying "OPEC is going to lower production" means prices go back up. And that's probably what will happen as soon as the US sees progress with Russia, Iran or both.
Although I would be surprised if US foreign policy didn't play into it, I don't think the argument that Saudi Arabia is soaking their competition is a farce. If prices rise, newer extraction methods in the US and Canada are viable, and given a foothold, there may be economies of scale and infrastructure that will bring them down over time. It's quite possible that the Saudis have more than one reason to keep production high, and that synergy might be why prices have fallen so very low.
The United States has largely invested in infrastructure rather than fields. Thus Keystone XL, thus the massive refinery retrenching around Houston. We now process something absurd like 20% of the world's oil. This takes time, energy and planning... while the drop in gas prices has taken place over a few months. Getting the US into a position where an oil squeeze benefits us and hurts others has taken some orchestration but here we are. As pointed out in flagamuffin's excellent article last night, the majority of the world's oil producers are now state-owned... and nobody is selling Iran refining equipment. When you're dealing with an organization that everyone calls a "cartel" with a straight face, it's purest folly to expect Adam Smith's Invisible Hands to be the cause of major geopolitical destabilization.If prices rise, newer extraction methods in the US and Canada are viable, and given a foothold, there may be economies of scale and infrastructure that will bring them down over time.
It's quite possible that the Saudis have more than one reason to keep production high, and that synergy might be why prices have fallen so very low.
It may not be bad for the global economy, but I sure as shit don't want to see oil consumption increase from all of this. We have a limited number of gigatons of carbon that can still be put into the atmosphere, and stay below 2 degrees of global warming. And 2 degrees warmer still means a 30% biodiversity loss by conservative estimates. Edit* If you haven't seen Gasland go watch it, and get scared.
I can understand the mindset. This in particular is scary because it is damn near irrefutable, unless you're the type of person who would listen to the 1 out of 10 mechanics who says that your breaks are fine and don't need repair, when 9 other mechanics said they would fail and kill you the next time you tried to stop. The truth however is scary in this regard. Humans suck at really understanding long-term existential threats. Climate change is one of them. The effects in particular of the petroleum business are longer lasting than several human lifetimes, are easily covered up or squelched, and the companies themselves actively work to obfuscate their own activities and the research of actual scientists.
I honestly think humanity will remain more adaptable than global warming's ability to effect us is. At the end of the day, we will be fine. We have recognized and prevented threats of similar situations in the past, and will continue to in the future. Even today renewable energy is growing faster than coal, and it's only getting better as time goes on. Remember that most power comes from coal, not oil. The price of coal needs to drop to effect it's use. The price of natural gas is already incredibly low (AFAIK), so it's not as if it being lower will bring it into adoption faster.
It's not about us. It's about the millions of species that will go extinct without ever having been discovered. It's about the lifesaving medicines that have yet to be found. It's about not fucking up the planet so royally that the only things that can live on it are humans, and whatever other species we deign to keep alive for our own amusement.
Life will survive us, most likely. Even if we undertook measures to erase everything with DNA we could find, including ourselves, something, somewhere would survive. But is that the legacy we want? That of the asteroid that offed the dinosaurs?
Nah, I'm pretty sure the reason for all of this is so that wasoxygen can win his bet. How's that going anyway? Must be looking good on your end right about now.
Things are indeed looking good. I expect at least one more adjustment to the Big Mac Index, which should put the comparison number up around $96. Oil closed at $50.04 yesterday. There is still time for a recovery, but after the last crash oil prices regained only half of the loss within a year. A similar recovery starting today would leave me comfortably in the black.
I'm not sure the situations are very comparable between now and '09. In that case, demand hit the wall due to the global recession. This time around, demand isn't as high as projected, but it's high by historic standards. Oversupply is driving the price down, and that is probably due to many factors that include both foreign policy (screwing Putin) and international trade (jockeying for market share). Demand is fickle, but supply can be altered willy nilly by the powers-that-be. I'm not saying the price recovery won't follow the same time course, I'm just saying that the etiologies of the two recent price collapses are not similar, and that there is no reason, therefore, for the recoveries to be similar either....after the last crash oil prices regained only half of the loss within a year.
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This comic was written before I was born, but I still think it's relevant today.