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Low Oil Prices a Sign of the End of the Age of Fossil Fuels

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We hear a lot of talk about oil prices and oil oversupply. A lot of people, including the Alberta Premier and Prime Minister Harper seem to be waiting for the “correction.” They apply the old saying, “What goes up must come down,” and conclude that “What goes down must come up.” Even at the metaphorical level this is a shaky conclusion.

But what if they are just wrong? Most analysts think the Saudis are just competing for market share, assuming that total sales will stay high. What if the Saudi believe that they are not going to be able to sell all the oil they have? What if they believe that climate change is so serious that we will see rising carbon taxes across the world and a fairly rapid move to electrification of transport? In that case prices are not coming up again until people stop worrying about climate change.

There is a lot of evidence that some important players think oil is doomed. Oil prices dropped over 11% this q11013395_362956063914485_8696054563935010700_nuarter. Guess what energy commmodity rose by over 11%? The performance of uranium suggests to me that some players in the energy game are shifting horses. Despite the horror many express about nuclear power, it is true that it is almost carbon-free and that nuclear power kills far fewer people every year than mayonaise. I personally think there is a renaissance on the way for nuclear power. Anti-nuke activists will make sure that the technology isn’t developed here, but they really can’t stop the application in countries like China that desperately need safe, high-density, carbon-free power. The evidence seems to show that the Chineses have made up their minds on this issue. The current price move suggests to me that it isn’t just the Chinese that have made up their minds.

Economc decisions in other industries also suggest we could be approaching the end of oil. We know the automakers are working hard to get electric cars to market despite the fact that gasoline engines are more and more efficient. At the very least they have hedged their bets. I think they really belive that the age of fossil fuels is ending. The technology of electric vehicles – motors, lightweight bodies, batteries, electronic controls – is moving at a blinding pace. As with solar power, the economic tide is turning in favour of the electric vehicle.

It might not be smart to bet on an oil-price “correction.” In fact, the low price of oil may be the correction.


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