Peakéd Oil

I’m currently paying $2.09 per gallon of gasoline, which is the lowest I’ve paid in a very, very long time— and which may, if you adjust for inflation, be the lowest gasoline price ever.

Ten years ago, people were saying that we’d met, or even passed, Peak Oil, wherein the supply was just going to go down and down, and the price up and up.  But now new technologies, including fracking, have resulted in a gusher of new oil spraying onto the market.  The result is energy prices falling off a cliff.

So . . . yay?

Well, there’s no cheering if you’re an oil producer.  If you happen to own a piece of the oil business— a piece of land with an oil lease somewhere, or a supply company, or some other energy-related business, you probably started getting mail over the summer from some branch of the energy industry urging you to tell your senator to vote against the Iran nuclear treaty.

Not because they were afraid of nuclear war in the Mideast, or the ayatollahs gaining more influence, but because they were afraid of an extra million barrels of Iranian crude getting dumped on the market every day, causing the price to decline even further.

IT’S THE APOCALYPSE! we’re told.  IT’S THE END OF AMERICA!

Well no, it’s not the end of America.  Just maybe the lush life led by some oil company execs.   And of course jobs held by a lot of ordinary oil company employees.

The rest of the economy will benefit just fine from cheaper energy prices.  And if it does, then those laid-off oil workers will find jobs elsewhere.

And meanwhile the oil industry will have to just make do with the twenty-odd billion dollars in subsidies and tax breaks given to them by grateful American taxpayers.

(And the Iran treaty?  The Senate Republican leadership arranged a vote on it, and then arranged that they’d lose.  Which tells me they think the treaty is okay, they just can’t admit to agreeing with Obama on anything lest their base melt down.)

Maybe the oil companies are right to panic.  After all, they have before them the collapse of Big Coal.  Due to a coal glut and diminishing demand from China and elsewhere, the Big Three American coal companies have seen their capitalization drop from $35 billion (in 2011) to $350 million.  99% gone!  And all in just the last few years.

(They blame Obama’s “War on Coal,” by the way, not declining demand or their own spendthrift ways.  While the administration’s tightening of admission standards has had some effect, the big losses were due to colossal price drops in metallurgical coal, which isn’t used in the power plants that Obama is trying to regulate.)

And the next crash?  Watch for natural gas prices to drop off a cliff.

In the meantime, the cost of wind-generated electricity has dropped by 30%, and there are now more Americans employed by solar power companies than are digging for coal.  Through advances in technology, new economies of scale, and innovative ownership structures (like leasing), renewable energy is stealthily positioning itself to grab a bigger slice of the market.  ($3500 for a Tesla Powerwall.  Which would pay for itself in less than two years.  And though the solar panels themselves would go for $10-20,000 on top of that, there’s a 30% rebate from America’s grateful taxpayers.)

So what’s a world like with Big Energy diminished?  A less influential Saudi Arabia, a less solvent Iran, a worsening Venezuela, a declining Nigeria?  Fewer dollars to buy political influence?  (Not that it costs much to buy a politician, but there are a lot of them.  And the buying in the States is concentrated on one party— over 90% of Big Coal’s political donations go to Republicans.)

Less money for climate-change deniers!  Less incentive to go to war over oil!

And it’ll be much cheaper to run Hummers and big SUVs!  ( . . . yay?)

So what other elements will we find in this Brave New World?  Who wins?  Who loses?  And what populations turn into refugees?