The FT has a major feature on the impact of falling oil prices in the paper today.
The term global warming does not appear.
Nor does emissions.
There is a cursory mention of carbon pricing, where cursory means a nod to Nicholas Stern.
But the overall suggestion is that oil use is something with no externality barring the impact on exchange rates, growth and deflation.
There are moments when I wonder what world some people live on. It would appear they do not think it is the same one as I know I inhabit.
In which case I guess I should say what I think should be done as a consequence of this oil price fall.
First oil production should be cut, by agreement. Economic stability requires it. So does the environment.
Second, Nicholas Stern is right: this is the moment to increase carbon repricing: revenue can be raised as a result of this fall to help fund energy repricing.
Third, governments have an urgent need in many countries to take action to prevent the deflation that will result from this price fall. Deflation always creates the risk of recession as spending stops because people anticipate price falls by delaying current spending.
And we need to take urgent action in anticipation of major economic failure. Russia is on the brink. And yes I know all the political reasons for that situation, but we really cannot afford a country like Russia facing collapse which its 17% interest rate suggests is happening.
Oil is a scarce commodity to be used wisely. For all sorts of reasons it looks likely that will be forgotten in the short term. We could pay a considerable price for it. Once upon a time such a price fall would have been universally welcomed. This time, I'm not so sure.
This time we may not be just burning our future: this time there may be real risk in the present as well unless urgent action is taken. But I suspect short termism at the petrol pump will prevent that. And that will reveal the poverty of our politics if it does.
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The one bright hope in this is that cheaper oil defers the day when fracking is economical.
Agreed
Might it defer the economic viability of renewable energy?
Yes
And that’s why I call for carbon pricing
You may like to consider that the main players are keeping output high, and even increasing it, to keep the price low.
Hydraulic fracturing is a high-cost operation, and a price lower than $63/B it is totally uneconomical.
Also, since the major players see Russia as competition, it does them no harm at all to see Russia sink into debt.
Note also that China, for one, is busy buying massive amounts of oil at the present low price (to be pumped later). So, when output falls, a significant percentage will be destined for China, and supply will fall again. Another thing to bear in mind is that Russia has signed contracts to supply oil and gas directly to China, via pipelines to be built. So supply to Europe will, eventually, be significantly higher than at present.
The EU was hoping to purchase supplies from the massive oversupply in the US (due to HF), which will obviously be at risk now.
Costs of production in the EU are already significantly higher than in the US, and several German companies are shifting production abroad as a consequence.
I personally see the EU as an economic backwater at the moment. I do not see it getting better any time soon.
As an aside, have you seen this:
http://www.pulsetoday.co.uk/20008750.article#.VJAOfNKsWn0
“Pulse has learnt that PwC has observed an ‘extraordinary level of interest amongst providers and commissioners in these new models’, and has already been holding conversations with trusts interested in taking on practice lists.
The consultancy firm is also advising GP and CCG clients on setting up the alternative model described by NHS England, whereby GP practices would become ‘multi-specialty community providers’ (MCPs) that employ consultants and offer much more care outside hospital by integrating closely with mental health, social care and pharmacy services, said Dr Tim Wilson, a partner in the PwC health sector team”
Thanks for this
Used as basis for a blog
And, since we have an election in the offing:
http://www.politics.co.uk/news/2014/12/05/too-little-too-late-electoral-commission-denies-complacency
Thanks
Tweeted
I’m confused. So the lower price of oil will mean we consume more of it. But lower prices of other things will mean we will consume less of them waiting for the price to fall further?
A specific price change and a general price change produce very different behavioural responses
Isn’t that obvious?
There is no such thing as a general price change. It is simply the summation of specific price changes.
No it isn’t….
But I can’t be bothered to argue