By Drs. Robert & Sonia Vogl
President and Vice President, Illinois Renewable Energy Association
While we do not know how long low oil prices will persist, they are already having an impact. For average citizens, lower gas prices means more money available in the family budget for other purposes. Low prices also protect and increase Saudi Arabia’s market share. The economies of Venezuela and Russia are contracting and under financial stress, which could have adverse political consequences for their existing governments. The 1986 collapse in oil prices was a major factor behind the breakup of the former Soviet Union. Current low energy prices will again challenge governments dependent on revenues from energy sales.
Terry Lynn Karl, author of The Paradox of Plenty, predicted in an interview by Andrew Nikiforuk that if oil prices stay low for a few years, the Canadian dollar will decline, pipeline problems will increase, and future investments will be reduced. She expects cuts in government services and that home sales, banking and citizen satisfaction with their government will decline as well.
Both oil companies and global economies have high levels of debt caused by the higher costs of securing hydrocarbons, which continue to be more difficult to extract. Karl describes the situation as one in which limited oil supply can cause recessions while a glut in oil supply can produce stock market failures. If high profits exist in oil, politics blocks better energy alternatives.
Similar adverse impacts on the shale oil industry in the United States are expected if low oil prices persist. Many drillers had difficulty being profitable at prices above $70 per barrel; it will be more difficult to be profitable with lower prices.
Even if oil prices rise dramatically, the total amount of extractable oil from shale could be far less than what had been promised. The estimates of energy independence came from a time when the price of oil was around $100 per barrel.
Since companies develop the most promising wells first, future sites are likely to be less productive. While improvements in technology are allowing companies to drill wells more quickly, the overall productivity of the wells remains the same.
In an interview with energy expert David Hughes, Chris Martenson reports that Hughes projects that shale oil production will peak by 2020.
Rising environmental concerns, low energy prices, prospects for shale oil and gas falling far short of original estimates along with steep declines in well production causes wonder as to why utilities and chemical companies are spending billions of dollars on infrastructure investments based on assumed continuous consumption of oil and gas over the next 50 years.
To enact a more sustainable energy policy than now exists, our country would be better served by placing our emphasis on conservation, efficiency and renewable energy. It will take time to implement a new energy system, but the technology is ready. According to a report by Deutsche Bank, rooftop solar PV will reach grid parity in all 50 U.S. states by 2016 and should lead to a dramatic increase in home and commercial installations. With continued improvements in the mileage range of electric vehicles, our need for oil could be dramatically reduced.
Drs. Robert and Sonia Vogl are founders and officers of the Illinois Renewable Energy Association (IREA) and coordinate the annual Renewable Energy and Sustainable Lifestyle Fair. E-mail firstname.lastname@example.org.
From the Dec. 31, 2014-Jan. 6, 2015, issue