Home' Trinidad and Tobago Guardian : November 16th 2014 Contents • Twitter: @GuardianTT • Web: guardian.co.tt
NEW YORK---Deepwater drilling
rigs are sitting idle. Fracking plans
are being scaled back. Enormous
new projects to squeeze oil out of
the tar sands of Canada are being
Maybe low oil prices aren t so bad
for the environment after all.
The global price of oil has plum-
meted 31 per cent in just five months,
a steep and surprising drop after a
four-year period of prices near or
above US$100 a barrel.
Not long ago a drop of that mag-
nitude would have hit the environ-
mental community like a gut-punch.
The lower the price of fossil fuels,
the argument went, the less incentive
there would be to develop and use
cleaner alternatives like batteries or
But at around US$75 a barrel, the
price is high enough to keep invest-
ments flowing into alternatives, while
giving energy companies less reason
to pursue expensive and risky oil
fields that also pose the greatest
threat to the environment.
"Low prices keep the dirty stuff
in the ground," says Ashok Gupta,
director of programmes at the Nat-
ural Resources Defense Council.
Economists and environmentalists
caution that if the price goes too
low, and stays there, consumption
could swell and the search for alter-
natives could stop. They say a good
price range for the environment
could be somewhere between US$60
As oil demand in developing
countries began rising in the last
decade, drillers struggled to keep up
and prices began to rise. It seemed
the world might be running out of
oil. Investors poured money into
advanced biofuels companies and
battery-makers betting high oil
prices would make it cheaper to drive
on plant waste or electricity.
It hasn t happened, despite some
headway. Even after years of growth,
electric cars accounted for just 0.4
per cent of new vehicle sales so far
this year, according to
Edmunds.com. Biofuels from plant
waste account for even a smaller
percentage of the nation s fuel mix.
The high prices instead inspired
drillers and investors to pursue oil
wherever it might be found no mat-
ter the expense. They developed
projects in environmentally-sensitive
areas or using environmentally-
destructive methods. They developed
technology that has unlocked vast
resources once thought out of reach.
What was once a shortage now looks
to be a surplus.
"It was a net negative from a cli-
mate perspective," says Andrew
Logan, director of oil and gas pro-
grammes at the environmental group
Ceres. "It locked us into long-term
dependence on oil."
Scientists say that in order to keep
global temperatures from rising to
especially dangerous levels, society
has to resist pulling up and burning
the enormous amounts of oil that
companies have found. The world s
two biggest emitters, China and the
US, reached a surprise agreement
last week that would work toward
that goal, though it remains unclear
whether or how the deal will be
The question now is whether this
plunge in prices will help or hurt
Some say the answer is clear:
"There will be more demand (for
fossil fuels) and less incentive for
alternative technology," says James
Stock, an economist who recently
served on the Council of Economic
Advisers and is now at Harvard Uni-
versity. "In the long run it is unam-
biguously bad to have low oil prices
from an environmental perspective."
With a national average price of
gasoline under US$3 per gallon for
the first time since 2010, people can
afford to drive more, and they are
buying more large SUVs. With gas
nearly 50 cents a gallon cheaper than
last year, it will take another 1.5 years
of fuel savings to recoup an invest-
ment in a more expensive, more
fuel-efficient Toyota Prius over a
But low oil prices don t always
translate to higher demand.
In the US, strict fuel economy
standards are making cars and trucks
more efficient, helping to reduce
demand regardless of price. The
Energy Department predicted this
week that the average price of gaso-
line would fall 13 per cent next year---
yet demand would also fall.
In much of the developing world---
which is propelling the rising global
demand for oil---fuel prices are set
by the government, not by markets.
Consumers don t pay less even if
the price on the open market falls.
And while low oil prices encourage
drivers to use more, they also force
oil companies to drill less. The places
they cut back first are areas that are
risky, like the Arctic or deep offshore,
or require lots of energy, like the
Canadian tar sands, because they
are the most expensive.
The offshore rig-owner
Transocean, which owned the Deep-
water Horizon rig that exploded in
2010 and led to the worst US oil
spill, announced special charges of
nearly US$3 billion last week because
demand for its rigs has fallen. Its
shares are down 42 per cent since
The Norwegian oil giant Statoil
announced in late September that
it would shelve plans to develop a
project in Canada that would have
produced 40,000 barrels of day of
oil for years.
The process is energy-intensive
and too expensive given oil prices
and construction costs.
If oil sands production slows, it
could lessen the need to build the
Keystone XL pipeline even if con-
gressional Republicans succeed in
their effort to get the Obama Admin-
istration to approve it.
The project is reviled by environ-
mentalists who believe it will further
tie the world to what they consider
especially dirty oil.
Ceres Logan says a perfect oil
price might be around US$70 a bar-
rel, near where it is now. Consumers
will still be careful with how much
they use, but oil companies might
not be willing to go to extreme meas-
ures to find new oil.
"It s low enough to make high-
carbon oil uneconomic, but not so
low that it kills off investments in
renewables," he says.
Can low oil prices be good
for the environment?
SUNDAY, NOVEMBER 16, 2014
A Whiting Petroleum Co pump jack pulls crude oil from the Bakken region of the
Northern Plains near Bainville, Montana. Discoveries of vast reserves of oil and
the slow progress of alternatives in recent years have given rise to a very
different outlook on oil prices. AP PHOTOS
Workers tend to a well head during a hydraulic fracturing operation at an Encana Oil & Gas (USA) Inc gas well
outside Rifle, Colorado.
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