The oil price is dropping is that good or bad news?

The oil price has dropped by roughly 50% in six months, the energy industry often has surprises and let no one deny this was a surprise.

The easy Good News is;

  • It is getting cheaper to buy fuel for the car
  • It is getting cheaper to buy gas and power for the home

The more complex Good News is;

  • This could be the major oil producers deciding that the end game for oil is within their sight (they look out 50 years) and so they are worried that their oil might get what is called ‘stranded’ a bit like having a lot of Kodak film just when the iphone6 comes out, its good stuff but no one wants it.  What might cause stranding of oil assets?; US shale oil, electric vehicles, air pollution standards, energy efficiency, solar energy, other renewable energy forms, its all pointing one way in the long term. So the complex Good News is that we are starting to move towards an oil free (or much reduced) energy system and that is good for the environment and is what we have now all agreed needs to happen.
  • Alaskan oil and Canadian tar sands might get scrapped

The easy Bad News is;

  • UK oil producers are going to find life tough and they employ a lot of people
  • The strike prices for renewable power will probably get lowered so slowing down the development of renewable power

The more complex Bad News is;

  • demand for oil will increase
  • the Middle East and Russia will have less income to pay for their social welfare costs

Ok so let me know what do you think, I believe its overall very good news as it marks the time the energy market’s catch up with the science of climate change – as Mark Carney say ‘only half the oil discovered by oil companies will ever be burnt’.