Column 6 - Declining oil price

Since a few months the oil price decreases. The oil price is measured in dollars per barrel. In June 2014 it had reached a maximum of $115,- for one barrel, but declined afterwards and currently the price of a barrel has reached $48,- and is still declining. There are several reasons for the declining oil price (van Gessen, 2014) (Postma, 2014):

• Overcapacity: the US became self-supporting by their drill for shale gas and oil shale. Moreover, Libya and Iraq have their oil production increased, despite of war violence.
• Disappointing demands: the recent slowing international economy whereby the demand for oil decreases.
• Usually the OPEC keeps the oil price on a stable level by producing less or more. Currently, they don't decrease the production because several countries did major investments that should stay profitable and moreover, they have to pay off their loans. Because of that, the OPEC countries cannot reach an agreement about the turning of the oil taps.
• During threats for war violence in oil producing countries, the price per barrel raises. Currently, IS extremists own batches of oil that they try to sell on the black market. The OPEC lower the prices so IS cannot make a lot of profit out of their sales.

The prospect for the oil prices is that they are not likely to increase before 2016 (van Gessen, 2014). The prices will not increase because of the slow growth of the world economy and the continuing production of oil shale in the US. It is unsure to what extent the low oil prices have an influence on the prices for gas and diesel, because it depends on the rate of the Euro against the US dollar (van Vliet, 2014).

 

The uncertainty and the complexity of the oil prices apply also for the consequences for the environment. Several consequences are summed below (van Vliet, 2014):

• Decreasing fuel prices can result in an increase of car use and thus more emissions. Besides, the need for electrical drive cars becomes less necessary. On the other hand, a decreasing consumption slow down the growth of the world economy, with all the consequences that will entail.
• Sustainable energy projects have to compete with the low energy prices, which then takes more time to pay off the loans. However, oil shale and oil from the Artic area have also to compete with the low energy prices, which is preferable due to the environmental risks.
• According to Shenggen Fan, general director of the International Food Policy Research Institute (IFPRI), there's both a positive and a negative side on the decreasing oil price. Corresponding with the oil prices, the food prices will decrease as well. Less fortunate people are able to buy themself food.
• Finally, global safety does also not gain from these oil price fluctuations. The oil is produced in politically unstable countries. If a war breaks out (especially in the Middle East), sustainability is one of our least problems.

 

The actual consequences for the environment are hard to predict. It is likely that the oil price did not reached the bottom yet. How much the price will decrease and when they are increase again is impossible to predict. In the meantime, the fluctuation prices still cause a lot of misery for the economy, the human well-being and maybe as well for the environment...

Bibliography

Postma, R. (2014, 11 27). Waarom de olieprijs maar blijft dalen. Retrieved 01 10, 2015 from NRC Q: http://www.nrcq.nl/2014/11/27/waarom-de-olieprijs-maar-blijft-dalen

van Gessen, R. (2014, 11 28). 5 redenen waarom olieprijs daalt. Retrieved 01 10, 2015 from Telegraaf: http://www.telegraaf.nl/dft/geld/23386864/__5_redenen_waarom_olieprijs_daalt__.html

van Vliet, P. (2014, 12 30). Dalende olieprijs goed slecht voor de economie. Retrieved 01 10, 2015 from Duurzaam nieuws: http://www.duurzaamnieuws.nl/dalende-olieprijs-goed-slecht-voor-de-economie/