Environment & the World

Tuesday, September 12, 2006

Implications of Oil Below $64

Filed under: Economics, Oil — amirj @ 6:15 pm

After a week of plummeting oil prices, the same thing happened today. The markets closed with oil below $64 per gallon at a six month low. This is not terribly surprising. The hurricane season has been quite calm, despite threatening words this summer Iran and Venezuela haven’t cut off oil supplies, the summer vacation/driving season is coming to a close, etc. While the news of this short-term slump is at odds with the first post I made to this blog, in which I predicted that oil prices will continue to rise into the future, I stand by my contention. Since global economies are so heavily reliant on petroleum products to generate energy and to fuel transportation (among other uses) and since we live in a capitalist regime that is predicated upon economic growth, we can only expect that future growth and dwindling supplies of oil will cause prices to climb in the future. Inasmuch as this is true, this sort of logic drives environmentalists crazy because they believe that economic growth should not be linked so heavily to oil consumption for all of its harmful effects on climate change, air pollution, etc. Others take their concerns about oil a step further–dismayed by the very notion that progress equals economic growth and also concerned about the power dynamics of the global oil economy which facilitate megacorporate concentrations of power and turning a blind eye to human rights violations in oil-exporting nations.

 Even though most consumers will be celebrating lower gas prices, this dip has some negative consequences as well. For one, it helps us forget, or, at least, rationalize the status quo. It gives us a little reason to stop complaining about rising gas prices, and it quells our yearning for the days when oil sold for $30 per barrel and we could fill up a tank of gas at around $1 per gallon just a few short years ago. Unfortunately, what we lose along with this are the anger and frustration at high gas prices, and with it, the impetus to do something about it. In terms of impetus, the weeks that brought higher and higher oil prices also ushered in heightened interest in renewable energy, carpooling, cheaper mass transit, and interest in fuel efficient and hybrid cars. These are the times when people most readily accept the argument that environmental protection and sustainable development make economic sense and when political impetus to attain energy independence coincides with environmental interests. The convulted irony of oil economics is that these rare eclipes, by definition, occur when oil prices are high and households, corporations, and governments are pinching pennies due to higher gas and other energy expenses. So when the will finally exists, the money to realize it lacks more than ever.

Now that oil is at a six-month low, by virtue of our culture’s short-sightedness, many people will breath a sigh of relief and feel empowered to maintain the status quo of our energy consumption habits. The allure of a few saved dollars has a funny way of assauging concerns over climate change, air pollution, and global power structures. Nevertheless, these environmental and social concerns still stand legitimate and insufficiently addressed. It’s a vicious cycle of sorts that I hope we can break free of. I just hope we can find the political will and strength to overcome the inertial comfort of temporarily lower oil prices to do something before we find ourselves helpless in a world of irreprable damage and paralyzed by unafforable energy costs.

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