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Comment by tsotha | Hacker News Reader

Whether this is bad from the environmental standpoint depends on why the price is low. The price may be low because demand is off.

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US oil production increased considerably over the past few years, then the Saudis deliberately increased production to drive down the high prices that had in part enabled the increased US production.

"Saudi Arabia has maintained a high level of oil production despite the slump in crude oil prices, arguing it needs to protect its market share in an economy in flux because of the glut of U.S. oil."

http://www.upi.com/Business_News/Energy-Resources/2015/07/13...

Demand had been increasing since the bottom of the great recession. This started last June with the dollar lifting off (pushing commodities down and crashing emerging markets), and the Saudis deciding to try to retain market share and crush the booming US oil production. So now, despite $40-$60 oil, the Saudis are producing the most oil they ever have. US oil companies have managed to constantly reduce the cost of their oil, with frackers getting it down to $40 to $50 / barrel, the US will produce almost a million barrels per day more than in 2014 despite the price drop. On top of all of that, the market is front running both Iran bringing its oil online again, and the Fed raising interest rates and sending the dollar higher.

"After mid-2014, the lion’s share of the decline in oil prices has been caused by negative oil-specific demand shocks and, to a lesser extent, by negative aggregate demand shocks. In contrast, the role of the oil supply (understood as the current physical availability of crude oil) has been small."

https://research.stlouisfed.org/publications/es/article/1034...

I am not sure if we could conclude that the demand is off. I believe that the traders who were controlling the inventories have finally closed their trades and walked away while they are ahead. Oil of course is a geopolitical commodity and a slide in prices usually helps developing countries that need oil to just keep the machinery running. Alternative sources are still not as accessible as one would like. All in all, I seem to think that this trend is not going to bode well for all the tax subsidies for solar panels in the US and will only delay discussions on climate change.

In fact it's low because supply is increased. Saudi was annoyed by North American innovation, and sought to dissuade private investors from financing any more of it. Private investors do wish that the price were higher, but it turns out that exploration and production costs are now low enough for North American production to be profitable still. For the most part, despotic regimes who control various national oilfields are suffering in the current market. Either Saudi don't care which of their competitors go out of business, or they have other reasons to keep production high over the medium term.

It is a race to the bottom in oil to fend off the development of new oil, but that will still happen once imported oil becomes more scarce.

The problem is that capitalism rapes externalities.

Even if you are not against the killing of an individual animal for food, for instance, the capability of doing so drives an increase in demand which drives an increase in supply -- billions of animals raised for the sole purpose of being killed for food. And then we try to do it more efficiently, at less cost, in factory farms. And economics drives us to this.

Similarly, the supply of oil will drive down prices and now result in newfound uses for it, we WILL use it up until none is left. And it's all in the atmosphere.

Same with elephant tusks in Africa being poached.

Same with overfishing.

Capitalism may be just too efficient... the name of the game is to increase money velocity through the system ... so without inflation, we will actually go even faster and eventually turn all the resources into garbage.

Oh and the greatest demand expansion of all... human population growth. The more people the faster we pollute. It's unsustainable. But all we can talk about are the cents each person is saving at the gas pump... really people?

The real "problem" with Capitalism is that the effects of the trade-offs being made are either not felt directly by the perpetrators or the feedback loop is too long that you end up in a "slowly boiling frog" situation.

If the person that reaps all of the money for a particular business makes enough money off of the venture that they can insulate themselves from the consequences, that is a failure of Capitalism. For example, someone lives in a community that depends on a particular waterway. They make a bunch of money by skimping on correct disposal of toxic waste, instead dumping it into the waterway. Once they've "made it," they take the money and leave the area. They are no longer feeling the effects of their actions, instead they are forcing them onto others. This is the legacy of Capitalism.

A supporter of capitalism would say the problem there is the lack of capitalism - someone should have owned the waterway, so that they'd have an incentive to sue if there was someone dumping stuff.

That would need changes to laws. A real supporter of capitalism would say the government should be owned by a king or group of shareholders who could put those kind of laws into place and defund the care of the disabled, etc.

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