Rising oil prices not only hurt at the pumps, they set up interesting anti-infrastructure wars
Rising oil prices make a lot of news. In the old days, whenever it happened the affected parties were well defined – those that produced oil loved higher prices, and everyone else hated them. It was such a simple world.
Now however the dynamics are much different. Consumers still hate higher gasoline prices of course, but there is now another group that is happy about them, sort of. Environmentalists tend to like higher oil prices because it makes renewable energy relatively more attractive, the adoption of which will hasten the demise of fossil fuels. When gasoline prices double, the stampede to smaller and/or more fuel-efficient vehicles is formidable.
Another factor that is or will lead to higher oil prices is the movement to stop all fossil fuel infrastructure development. Many leading climate scientists believe this to be necessary to keep earth’s temperature increases within acceptable bounds.
This strategy – of killing off any new infrastructure development – has an unintended side effect though, one that is near and dear to economists’ cold little hearts. The problem is similar to the war on drugs. Declaring war on the suppliers can increase costs, but that only attracts more suppliers because the profits are bigger.
Stopping energy infrastructure projects means that fossil fuels won’t easily get from where they’re created to where they’re wanted. So prices will rise if this ultimately results in scarcity.
The result of that though will be money flowing into oil and gas exploration, because it’s more profitable. So this will ultimately lead to more development, if at all possible. The last point is significant, because the same people that seek to halt energy infrastructure development will work to halt new wells, new pipelines, etc.
All well and good from an environmental perspective, right? Wrong. Because what will happen then is what always happens – someone will provide it, and the ones that do will be the ones with the lowest standards.
If it becomes impossible to build a pipeline in North America, or drill a well, or whatever, the money will got to Russia or Nigeria or some other country with much less interest in environmental standards. (Russia is one of the world’s largest oil producers; any idea what their spill record is? Or most OPEC countries? And if they do publish statistics, should we believe them?)
Ironically then, freeing North America and Europe from future fossil fuel development will lead to production increasing in parts of the world that will most likely increase global greenhouse gas emissions and environmental contamination. Just another one of life’s unintended consequences that, like the war on drugs, no one will likely ever think through all the way.