Oil Price Melancholy

The price of oil is way down lately - leading to under $2 gas in some parts of the country. And Americans are very happy about it. I, on the other hand, am very unhappy about this development.

I'll be the first to admit, the discovery of oil and it's historically cheap extraction has been pretty good to us. Oil is a big part of what powers our machines, ships our goods, whisks us around town, and heats our homes. Without fossil fuels like oil, I would be hard pressed to see how anything resembling our modern society would have been formed. But extracting and burning oil has a lot of downsides.

Low oil prices help perpetuate the status quo of dirty fossil fuels at the center of our energy system, and the twisted global economics and geopolitics that goes with it.

Oil is bad for the environment, toxic, and it's carbon emissions are threatening to wreak global havoc in the coming decades. The Exxon Valdez spill is still causing damage to Prince William Sound 25 years later. Burning oil has polluted the air so much that in the United States alone 20,000 people per year actually die permaturely. 2014 was just officially determined to be the warmest year on record. The idea that we can continue to spill and burn oil, as well as emit vast sums of carbon without consequences is mind-numbingly idiotic.

But these low oil prices are leading consumers to do things like buy more gas guzzling SUVs. To consumers, it now takes longer to see any payback from buying a more fuel efficient car, and so they make the easy short term choice. These SUVs will be on the road for a decade or two, and will require lots and lots of oil. The allure of cheap oil has led to countless other short term decisions like this that have long term consqeuences. Our oil-based energy system has enormous inertia, and adding all this extra machinery that is dependent on oil only further cements it in place, and makes it harder to dismantle.

Companies that are developing alternative forms of energy (the only hope we have of unburdening us from oil) are also really hurt from these low oil prices. Consumers are, for instance, less likely to consider installing solar panels when their home heating oil bill just got cut in half. Investors, if they think this trend of low oil prices is here to stay, could also start to sour on any investments in new forms of energy as a result of decrease cost competitiveness to oil. This is a tragedy not simply for the delay in fixing the woes of our oil-based energy system, but for the delayed benefits of what clean, secure, abundant and cheap new forms of energy can yield.

While the lower oil prices we are experiencing will lead to a less aggressive foreign policy on behalf of oil-rich countries^[1], this is only a temporary reprieve. First, we are only another oil price boom away from seeing these countries flush with oil revenue again. Second the best outcome isn't to just occasionally lower their oil revenues - it's to permanently eliminate these revenue streams. High oil prices are what is needed in the long run to change consumer behavior, and spur investment into new forms of energy. Low oil prices simply perpetuate the status quo for longer.

Even with lower oil prices, there is still a huge on-going transfer of wealth from energy consuming countries like the United States to oil-rich countries. During a time of low oil prices, we are merely seeing less money disappear beneath our feet, but the only way to stop the bleeding is to stop using oil, and in the long run high oil prices are how we get there.

Our economy is addicted to oil, and low prices are providing all of us an excuse to continue using it. A heroin addict doesn't need a price cut help stimulate their continued use, on the contrary, they need an intervention to help them stop using once and for all. That is exactly what our economy needs in regards to oil. While high oil prices are only one way to sow the seeds of it's own destruction, it seems to be the most efficient and likely to happen in the near term, which is why these low oil prices have me so low.

^{1. Oil Prices and Interstate Conflict Behavior, 2014 PDF ↩}