Cheap oil, complexity and counterintuitive conclusions

Categories: Big picture
Published on: March 22, 2015

Resource Insights / Kurt Cobb / 22 March 2015

It is a staple of oil industry apologists to say that the recent swift decline in the price of oil is indicative of long-term abundance. This kind of logic is leading American car buyers to turn once again to less fuel efficient automobiles–trading efficiency for size essentially–as short-term developments are extrapolated far into the future.

The success of such argumentation depends on a disability in the audience reading it. The audience must have amnesia about the dramatic developments in the oil markets in the last 15 years which saw prices reach all-times highs in 2008 and then after recovering from post-crash lows linger at the highest average daily price ever from 2011 through most of 2014. And, that audience must have myopia about the future. It is an audience whose attention has narrowed to the present which becomes the only reference point for decision-making. History is bunk, and what is, always will be.

The alternative narrative is much more subtle and complex.

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