5 ms·

High oil prices are a good thing for the environment.

prasadjoglekar 5y ago
Maybe in the long run. This winter, poor people still need heating oil and natural gas without going bankrupt.
eloff 5y ago
I'm not sure about that. High oil prices spur investment in extracting oil. In the short term it might reduce demand slightly (oil demand is quite inelastic) but long term it may have the opposite effect.
- toomuchtodo 5y ago
  Consistent high prices spur investment. Price volatility encourages demand destruction (temporary through a reduction in use, long term through selecting alternatives). Without consistency, returns are unpredictable and capital investments will be directed elsewhere.
  - adventured 5y ago
    > Without consistency, returns are unpredictable and capital investments will be directed elsewhere. No, the oil companies will keep being oil companies. Chevron, Exxon, BP, Aramco, KPC, NIOC, Royal Dutch Shell, PetroChina/CNP, Total, Rosneft, Petrobras, Pemex They don't redirect their capital investments elsewhere just because oil went from $72 to $90 and then back to $72. They just keep being oil companies, it's what they do. Most of them focus on hedging prices as best they can to deal with price volatility.
    - toomuchtodo 5y ago
      https://www.fool.com/investing/2020/10/10/oil-investment-hits-a-multi-year-low-what-it-means/ https://www.fool.com/investing/2020/10/10/oil-investment-hit... https://www.reuters.com/business/energy/big-oil-keeps-brakes-spending-even-with-crude-rally-windfall-2021-07-12/ https://www.reuters.com/business/energy/big-oil-keeps-brakes... https://www.bcg.com/publications/2020/oil-and-gas-investment-during-the-covid-era https://www.bcg.com/publications/2020/oil-and-gas-investment... https://www.nsenergybusiness.com/features/oil-gas-spending-cuts/ https://www.nsenergybusiness.com/features/oil-gas-spending-c... https://www.ogj.com/general-interest/article/14201118/2021-capital-spending-to-be-mostly-conservative https://www.ogj.com/general-interest/article/14201118/2021-c...
      - adventured 5y ago
        You said capital investment will be redirected elsewhere (where?). Your links disagree with what you said. The oil majors may restrain spending, they may cancel projects. They don't direct capital spending elsewhere. If oil prices are so low that they pull back on capital spending, they stop spending and cut costs in their operations, they don't redirect their spending. Wall Street redirects industry capital investment in that climate, oil companies do not. You were talking about price volatility, which I referenced as oil going from $72 to $90 back to $72. What you're now suggesting wasn't mere price volatility, that was an extreme crash, caused by a brief global economic shut-down which sent prices to a multi-generational low. Which is why your links are so Covid era heavy in relation to that one-time event. That's like pretending WW2 is a common occurrence and projecting industrial behavior based on it. If oil crashes to $20, Exxon doesn't redirect their capital spending elsewhere. They aggressively stop spending. The oil majors all hedge price volatility. They're very used to dealing with price volatility. It's central to their business operations. What they don't do, is stop being oil companies, they don't redirect their capital investment to becoming farmers or car manufacturers or investing in tech companies just because the price of oil is lower by $20 or $30.
  - danans 5y ago
    That is a good point, but I wonder how significant the effect really is. If you look at charts of oil prices for the last 20 years [1] vs US oil consumption the last 20 years [2], the only significant drops in either appear to be due to a) the 2008 financial crisis, and b) the COVID19 pandemic. Therefore, it seems like demand for oil has been fairly inelastic to oil price, but instead is tied to the underlying rate of economic activity - AKA people drive less when they don't have jobs. Now of course that was also because there was no significant alternative to oil as a transportation fuel. Today we have an alternative, so perhaps the volatility will manifest in a shift away from petroleum investment. Even on the consumption side, nearly everywhere in the US electricity is multiples less than the price of gasoline per vehicle mile driven, so it's a bit of an obvious change of fuel on an economic basis alone. 1. https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha... 2. https://www.statista.com/statistics/264825/oil-consumption-in-the-united-states/ https://www.statista.com/statistics/264825/oil-consumption-i...
Bjorkbat 5y ago
High oil prices mean that fracking becomes an economically viable means of extracting oil.
- LeftHandPlane 5y ago
  What makes you think fracking is not economically viable? The majority of the wells drilled in the US (by a large margin) are fracked. Fracking is very much an economical method for oil extraction right now, and is still viable at ~$50/barrel.
  - vnchr 5y ago
    There’s even more opportunistic fracking when the price is higher, historically. A lot of wildcat fracking operations shut down when the price of oil drops.
    - adventured 5y ago
      While that's true, the era of wildcatter fracking being relevant to production in the US are largely over. The majors now entirely dominate the fracking segment and fracking-based oil production. They've gone on an acquisition spree across the past decade and tower over the smaller operators. All you have to do is look at the acres owned by the majors in fracking areas like the Permian vs small operators now (compared to the beginning of the fracking era). Like this $9.5 billion deal the other day between Shell and Conoco. Wildcatters can't compete at these prices for the most part. They can't afford the real-estate now (in the early days when the industry was asleep and or skeptical they could). https://www.shell.com/media/news-and-media-releases/2021/shell-signs-agreement-to-sell-permian-business.html https://www.shell.com/media/news-and-media-releases/2021/she... The majors bring a more traditional, disciplined approach to pursuing cut-throat production competition or not and have a more consistent, less volatile schedule for capital investment. They're not as sensitive to medium size moves in oil prices when it comes to changing plans.
CalRobert 5y ago
Sort of, in that it means people use less, and renewables become more competitive, but also not, because it makes fracking and more oil extraction profitable.
missedthecue 5y ago
It really just incentivizes further drilling.
asdff 5y ago
What are people going to do, buy a $40,000 tesla because gas is up a buck a gallon?
- twofornone 5y ago
  Well, yes, there's always some probability that a given individual will buy an EV or make some other green decision, and pressure from oil prices influences that probability. If you step back and look at population statistics then a ~2x price increase in petroleum will absolutely influence the green economy.
  - asdff 5y ago
    Most of us live somewhere where if the price of gas goes up, the price of electricity also goes up. We don't all have a nuclear powerplant supplying our home.
- w-j-w 5y ago
  Shipping companies might.
- invisible 5y ago
  I think you're being sarcastic with this line of questioning, but at some price the answer is most certainly "yes." Also, the car market is insane. $40k for a new vehicle isn't really that crazy _right now_ (especially for SUVs and trucks) and some folks are paying more for a used car than a new just to be able to get a vehicle immediately.
  - asdff 5y ago
    There is still a huge sector of car buyers who are buying these base model economy cars for $16000, or these rust bucket used cars for $4000. Those are the people most affected by their monthly gas bill going from $100 to $200. Not the people who can afford to buy or finance a 40k asset.
    - invisible 5y ago
MeinBlutIstBlau 5y ago
Kinda hard to save the environment when the whole economic system is devised for the people who save the environment and promote that stuff rely on oil to give them the goods necessary to continue with their work. Only way we can reduce dependence on oil is if the government just shells out for us to move there. Otherwise the free market (regardless of oil price) will move there in a fraction of the time we should be.
- roamerz 5y ago
  The government does not have money to shell out it is the people that work for a living that shell out via taxes.
  - MeinBlutIstBlau 5y ago
    The government can and does whatever they want with "your money" just like Amazon and Walmart do whatever they want with "your money." You have no say in it. The government is different in that it is a perpetual entity unlike the latter which theoretically is supposed to endure indefinitely. The fact that it's involuntarily funded is irrelevant. You have no say in what they do with your money unless you can somehow convince a mob to protest long and hard enough to get them to back down.
elil17 5y ago
I would say that artificially high oil prices are. Taxes, cartels, and the like all help reduce total oil use. If the high prices are due to increased demand, then it’s just motivating companies to pursue further drilling.

Maybe in the long run. This winter, poor people still need heating oil and natural gas without going bankrupt.

I'm not sure about that. High oil prices spur investment in extracting oil. In the short term it might reduce demand slightly (oil demand is quite inelastic) but long term it may have the opposite effect.

toomuchtodo 5y ago
Consistent high prices spur investment. Price volatility encourages demand destruction (temporary through a reduction in use, long term through selecting alternatives). Without consistency, returns are unpredictable and capital investments will be directed elsewhere.
- adventured 5y ago
  > Without consistency, returns are unpredictable and capital investments will be directed elsewhere. No, the oil companies will keep being oil companies. Chevron, Exxon, BP, Aramco, KPC, NIOC, Royal Dutch Shell, PetroChina/CNP, Total, Rosneft, Petrobras, Pemex They don't redirect their capital investments elsewhere just because oil went from $72 to $90 and then back to $72. They just keep being oil companies, it's what they do. Most of them focus on hedging prices as best they can to deal with price volatility.
  - toomuchtodo 5y ago
    https://www.fool.com/investing/2020/10/10/oil-investment-hits-a-multi-year-low-what-it-means/ https://www.fool.com/investing/2020/10/10/oil-investment-hit... https://www.reuters.com/business/energy/big-oil-keeps-brakes-spending-even-with-crude-rally-windfall-2021-07-12/ https://www.reuters.com/business/energy/big-oil-keeps-brakes... https://www.bcg.com/publications/2020/oil-and-gas-investment-during-the-covid-era https://www.bcg.com/publications/2020/oil-and-gas-investment... https://www.nsenergybusiness.com/features/oil-gas-spending-cuts/ https://www.nsenergybusiness.com/features/oil-gas-spending-c... https://www.ogj.com/general-interest/article/14201118/2021-capital-spending-to-be-mostly-conservative https://www.ogj.com/general-interest/article/14201118/2021-c...
    - adventured 5y ago
      You said capital investment will be redirected elsewhere (where?). Your links disagree with what you said. The oil majors may restrain spending, they may cancel projects. They don't direct capital spending elsewhere. If oil prices are so low that they pull back on capital spending, they stop spending and cut costs in their operations, they don't redirect their spending. Wall Street redirects industry capital investment in that climate, oil companies do not. You were talking about price volatility, which I referenced as oil going from $72 to $90 back to $72. What you're now suggesting wasn't mere price volatility, that was an extreme crash, caused by a brief global economic shut-down which sent prices to a multi-generational low. Which is why your links are so Covid era heavy in relation to that one-time event. That's like pretending WW2 is a common occurrence and projecting industrial behavior based on it. If oil crashes to $20, Exxon doesn't redirect their capital spending elsewhere. They aggressively stop spending. The oil majors all hedge price volatility. They're very used to dealing with price volatility. It's central to their business operations. What they don't do, is stop being oil companies, they don't redirect their capital investment to becoming farmers or car manufacturers or investing in tech companies just because the price of oil is lower by $20 or $30.
- danans 5y ago
  That is a good point, but I wonder how significant the effect really is. If you look at charts of oil prices for the last 20 years [1] vs US oil consumption the last 20 years [2], the only significant drops in either appear to be due to a) the 2008 financial crisis, and b) the COVID19 pandemic. Therefore, it seems like demand for oil has been fairly inelastic to oil price, but instead is tied to the underlying rate of economic activity - AKA people drive less when they don't have jobs. Now of course that was also because there was no significant alternative to oil as a transportation fuel. Today we have an alternative, so perhaps the volatility will manifest in a shift away from petroleum investment. Even on the consumption side, nearly everywhere in the US electricity is multiples less than the price of gasoline per vehicle mile driven, so it's a bit of an obvious change of fuel on an economic basis alone. 1. https://www.macrotrends.net/1369/crude-oil-price-history-chart https://www.macrotrends.net/1369/crude-oil-price-history-cha... 2. https://www.statista.com/statistics/264825/oil-consumption-in-the-united-states/ https://www.statista.com/statistics/264825/oil-consumption-i...

Bjorkbat 5y ago

High oil prices mean that fracking becomes an economically viable means of extracting oil.

LeftHandPlane 5y ago
What makes you think fracking is not economically viable? The majority of the wells drilled in the US (by a large margin) are fracked. Fracking is very much an economical method for oil extraction right now, and is still viable at ~$50/barrel.
- vnchr 5y ago
  There’s even more opportunistic fracking when the price is higher, historically. A lot of wildcat fracking operations shut down when the price of oil drops.
  - adventured 5y ago
    While that's true, the era of wildcatter fracking being relevant to production in the US are largely over. The majors now entirely dominate the fracking segment and fracking-based oil production. They've gone on an acquisition spree across the past decade and tower over the smaller operators. All you have to do is look at the acres owned by the majors in fracking areas like the Permian vs small operators now (compared to the beginning of the fracking era). Like this $9.5 billion deal the other day between Shell and Conoco. Wildcatters can't compete at these prices for the most part. They can't afford the real-estate now (in the early days when the industry was asleep and or skeptical they could). https://www.shell.com/media/news-and-media-releases/2021/shell-signs-agreement-to-sell-permian-business.html https://www.shell.com/media/news-and-media-releases/2021/she... The majors bring a more traditional, disciplined approach to pursuing cut-throat production competition or not and have a more consistent, less volatile schedule for capital investment. They're not as sensitive to medium size moves in oil prices when it comes to changing plans.

CalRobert 5y ago

Sort of, in that it means people use less, and renewables become more competitive, but also not, because it makes fracking and more oil extraction profitable.

missedthecue 5y ago

It really just incentivizes further drilling.

asdff 5y ago

What are people going to do, buy a $40,000 tesla because gas is up a buck a gallon?

twofornone 5y ago
Well, yes, there's always some probability that a given individual will buy an EV or make some other green decision, and pressure from oil prices influences that probability. If you step back and look at population statistics then a ~2x price increase in petroleum will absolutely influence the green economy.
- asdff 5y ago
  Most of us live somewhere where if the price of gas goes up, the price of electricity also goes up. We don't all have a nuclear powerplant supplying our home.
w-j-w 5y ago
Shipping companies might.
invisible 5y ago
I think you're being sarcastic with this line of questioning, but at some price the answer is most certainly "yes." Also, the car market is insane. $40k for a new vehicle isn't really that crazy _right now_ (especially for SUVs and trucks) and some folks are paying more for a used car than a new just to be able to get a vehicle immediately.
- asdff 5y ago
  There is still a huge sector of car buyers who are buying these base model economy cars for $16000, or these rust bucket used cars for $4000. Those are the people most affected by their monthly gas bill going from $100 to $200. Not the people who can afford to buy or finance a 40k asset.
  - invisible 5y ago

MeinBlutIstBlau 5y ago

Kinda hard to save the environment when the whole economic system is devised for the people who save the environment and promote that stuff rely on oil to give them the goods necessary to continue with their work. Only way we can reduce dependence on oil is if the government just shells out for us to move there. Otherwise the free market (regardless of oil price) will move there in a fraction of the time we should be.

roamerz 5y ago
The government does not have money to shell out it is the people that work for a living that shell out via taxes.
- MeinBlutIstBlau 5y ago
  The government can and does whatever they want with "your money" just like Amazon and Walmart do whatever they want with "your money." You have no say in it. The government is different in that it is a perpetual entity unlike the latter which theoretically is supposed to endure indefinitely. The fact that it's involuntarily funded is irrelevant. You have no say in what they do with your money unless you can somehow convince a mob to protest long and hard enough to get them to back down.

elil17 5y ago

I would say that artificially high oil prices are. Taxes, cartels, and the like all help reduce total oil use. If the high prices are due to increased demand, then it’s just motivating companies to pursue further drilling.