Brilliant article – must read.
World oil prices routed to 49 dollars per barrel today amidst weak global demand. It’s a sea change in the oil and energy markets that is now in the process of rattling many previously well established oil ventures to their foundations. A shot across the bow that may well signal the beginning of the end of crude due to a combination of expensive production, competition by renewables and efficiencies, and a widespread recognition of ramping hazards from human-caused climate change.
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During the summer of 2014, amidst geopolitical crisis after geopolitical crisis in oil producing regions of the globe, world crude oil prices spiked to near 115 dollars per barrel. Ever since the mid 2000s, global producers had struggled to keep up with demand or to even keep crude + condensate production flat. But as of 2012, deregulated US fracking technology had ruptured large sections of…
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The Secular Jurist 
I still don’t get why the price of oil going down has created such a problem. I read a bit of the article above, but I still have trouble understanding.
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I’ll try to summarize it.
As supply shortages triggered very high oil prices (since the 1970s, but more recently and applicably in the 2000s), it became profitable to produce oil and gas from costly, technologically-intensive sources such as tar sands (Keystone XL) and shale deposits (fracking). These new sources increased the supply of oil and – as a result – lowered its market price.
At the same time, the 2008 financial crisis and Great Recession hit which depressed the global economy and thereby reduced the demand for energy including oil.
Also at the same time, clean and renewable energy sources were coming online (wind, solar, and bio-fuels) which created market competition for oil and further depressed its price.
Then, cost-cutting austerity measures in the West, Middle East wars, and economic sanctions against major oil-producing nations (Iran and particularly Russia) decreased economic demand even more which sent the price of oil into free-fall.
Saudi Arabia, as a competitor to new energy sources, opportunistically maintained its high oil production rates in order to exacerbate the over-supply of oil (force prices lower) and thereby forcing its tar sands/shale deposit competitors out of business. Note that the production of Saudi Arabian crude is much, much less costly.
As these tar sands/shale deposit oil and gas producers fail, it depresses the economy even more and eventually will cause a spike in oil prices as the supply shrinks. This could potentially cause an extreme and very scary economic downturn.
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Is the decrease in supply inevitable, or is it because of the low prices?
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If it costs the new tar sands/shale deposit producers more to extract oil and gas than they can sell it for (which is happening now), they’ll go out of business. If they go out of business en masse, the supply of oil and gas will decrease dramatically. Furthermore, fossil fuels are a finite resource on this planet – regardless of the new production technologies – and we’re burning it up at a tremendous rate. So, either way supplies will shrink over time. It is imperative that we get off fossil fuels as quickly as possible.
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Is the current price of oil still down?
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See: North Dakota county feels Bakken boom ebb away as oil falls
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Do you think there will be a further increase in use of renewables now? It looks like the increase in its use is hurting the oil industry.
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Clean and renewable energy sources are definitely on the rise. However, they still represent only a small fraction of total energy production. We should be developing them much faster right now. The oil industry has been slow to jump on the wind/solar/bio-fuels bandwagon, and they’re doing so at their own peril… as well as ours.
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