Cheap Oil Is Here To Stay Thanks To Fracking

natgeo end of oilThe technological innovation of the shale industry has benefits for conventional oil too, and will save us all money. The continuing plunge in the price of oil from $115 a barrel in mid-2014 to $30 today is really, really good news. I know just about every economic commentator says otherwise, predicting bankruptcies, stock market crashes, deflation, political turmoil and a return to gas guzzling. But that is because they are mostly paid to see the world from the point of view of producers, not consumers. Yes, some plutocrats and autocrats won’t like it, but for the rest of us this is a big cut in the cost of living. Worldwide, the fall in the oil price since 2014 has transferred $2 trillion from oil producers to oil consumers. —Matt Ridley, The Times, 8 February 2016 (paywall), More story here

Whilst oil prices might spike higher in the short-term, analysts at Handelsbanken expect the price to remain low longer-term as new sources of production keep global supply ‘pumped’. Oil will spike in the short-term but longer-term it will fall back down to 30 dollars per barrel according to research published by Handelsbanken Capital Markets. Those hoping that there will be a rebound in the price of oil as shale oil production falls, reducing global supply, will be dissappointed according to Handelsbanken’s analysis. Instead of shale operators going bankrupt due to the relatively high cost of production using this method, as some analysts believe, Handelsbanken argue many shale producers will actually survive, lower their costs and continue producing. —Joaquin Monfort, Pound Sterling Live, 4 February 2016 

When oil and gas prices were high, DECC used to publish an annual Energy Statement, which included an assessment of the impact of policy measures on prices. John Constable notes that now that fossil fuel prices have crashed, DECC has decided that the statement is no longer necessary. It’s hard to see this as anything other than an attempt to hide the disastrous impact of the government’s approach. Apparently, in the last assessment it was said that in a “low-price” scenario, policy measures would be increasing prices by up to 77% for some users. Given that fossil fuel prices are far below those assumed in that scenario, that could easily be more than double. —Andrew Montford, Bishop Hill, 8 February 2016

It is becoming increasingly difficult to form a reasoned view of the cost impacts of energy and climate policies in the United Kingdom, and government is not helping the situation, since it no longer publishes the fine details of its own estimates. Admittedly, the situation is extremely confusing. Falling fossil-fuel prices, led by oil, and largely beneficial to consumers of course, should result in lower electricity generation costs, and indeed to lower capital costs for new gas-fuelled generators. It is also true that these low fossil costs should reduce the capital costs of renewable generators such as wind and solar, since this capital equipment is an output of the fossil economy. This might perhaps lead to an opportunity to further reduce renewables subsidies. However, CAPEX, though central, is not the only the matter of concern to investors, with Operation and Maintenance costs increasingly prominent. —Dr John Constable, Global Warming Policy Forum, 8 February 2016

Andreas Malm longs for the good old days. In his new book, Fossil Capital: The Rise of Steam Power and the Roots of Global Warming, Malm, who teaches human ecology at Lund University in Sweden, pines for a time when manufacturing depended on waterwheels instead of steam engines. Indeed, Malm spends more than 300 pages — about 75 percent of the text—discussing why English manufacturers abandoned waterwheels and replaced them with coal-fired steam engines. It’s worthwhile history. But in the hands of an avowed Marxist like Malm, it’s tedious sledding. In Malm’s view, the rise of the steam engine was little more than a ploy by evil capitalists to subjugate workers, and because of that, we are now all going to die from global warming. —Robert Bryce, City Journal, 5 February 2016

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    Amber

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    The fall in oil prices wipes out any so called price signal from carbon taxes and shows what utter nonsense taxes like that are in a volatile open market .

    A carbon tax is a guilt tax sold on the false premise it changes human behavior . When it is dwarfed by commodity market volatility,
    both up and down, it is meaningless other than the competitive disadvantage it places on the politically correct places that impose it . Technological change ,population growth or declines and other social factors drive energy demand not some feel good save the planet fluff tax .

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