The Quantum Economist: Driving through Bethesda, Md. today, I heard a breathless radio news announcer decry that falling oil prices already are leading to layoffs in the oil industry. Cry me a river. Newspaper reports on the oil price drop, from roughly $100/bbl in June to roughly $60 today, tend to point to winners & losers among countries. In the US & Canada, however, and even in other oil-producing countries, the effects vary across regions, and across industries within the oil sector. For example, operators of stripper wells (tertiary recovery) and fracking oil well drillers & producers will be hurt first & hardest, because they have the highest costs. They wont purchase as much of the toxic drilling mud that they have to pump underground to drive the hydrocarbons to their wells. That is straight up good news for humanity. That drilling mud is laced with benzene and other toxic chemicals that are kept secret from the US public under laws framed by & for the fracking industry with the help of former Vice President Dick Cheney. Companies in the tar sands business also will suffer, to a lesser degree, depending on the costs they face. That will affect tar sands projects in Venezuela, Canada and to a lesser extent, Colombia. Another category of energy producers who could face problems, potentially, are some very high-cost solar and wind electricity projects, as well as some nuclear electric power plants that are uneconomic anyway, without massive hidden subsidies (I am looking at you, UK PM David Cameron, and your secret deal to purchase nuclear power stations from Japans Fukyuppi Corp.) Some people are saying that the oil price decrease is a less clear-cut boost to the world economy this time than it has been in the past. Thats really not true. What has changed here is that some people who had been collecting trillions of dollars in economic rent for many, many years, without lifting a finger, because of market failures (namely, rigged oil markets), no longer will be collecting those unearned economic rents. Most of the people who were collecting those economic rents were straight-up villains, anyway. The oil industry, like the coal mining industry and other primary mining & drilling industries, has a horrible record of despoiling the areas where it operates. Look at the politics & society of Houston, and Louisiana and the Cancer Alley of petrochemical factories along the Gulf Coast from Florida to Texas. Oil industries promote unbalanced income distribution and social unrest; thats why the great Arabic novel Cities of Salt, which describes how the local sheikhs and the Saud family princes took gold from Western oil companies to sell out their fellow desert residents, and leave them lost and alienated in a toxic wasteland, is banned, to this day, in Saudi Arabia. books.google/books/about/Cities_of_Salt.html?id=GZzFQgAACAAJ
Posted on: Tue, 16 Dec 2014 04:41:27 +0000
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