Thursday, February 12, 2015

The Upside to Low Oil Prices

While much has been said about the downside to low oil prices there is also an upside. Low oil prices introduce a disincentive to the financial equation to invest in fossil fuel exploration and development. This is particularly important for the environment as some of the most expensive fossil fuels come from the most ecologically sensitive areas.

Perhaps the biggest single benefit from low oil prices will be the downward pressure it exerts on tar sands expansion. This is not only the most carbon intensive source of fossil fuels it is also four times more expensive than traditional oil extraction. We are currently well below the break-even price of around $75 per barrel. With a break-even point of around $60 per barrel US shale drilling projects are also going to suffer.

Any decrease or even a delay in these carbon intensive forms of fossil fuel extraction is a boon for renewable energies. Every day that the dirtiest forms of oil are delayed represents means that much less carbon will be emitted into the atmosphere.

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