Australasian Science: Australia's authority on science since 1938

Cheap Petrol Signals End of the Oil Age

By Ian Lowe

Petrol prices have dropped as the Saudis recognise that a cheap barrel now is better than a barrel left in the ground tomorrow.

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With world oil prices lower than they have been for years, motorists are relieved to be paying less for fuel. But the price drop has caused some questioning of the whole notion of “peak oil”. If oil is getting scarcer and more expensive to produce, shouldn’t the price still be going up?

The most important change last year was that Saudi Arabia halted its policy of holding back its production to keep the price high. With more oil coming from Saudi Arabia, the price has dropped to about half the level a year ago. Why did the Saudis change their approach?

One theory was that they were trying to shake out of the market the more expensive oil being produced by US offshore wells and unconventional sources. The lower price is certainly a threat to the financial viability of some of those producers.

A second theory was that Saudi Arabia was trying to weaken the position, economically and politically, of producer nations like Iran and Russia, whose oil costs much more to extract than the oil in the Arab states.

Now a US energy analyst has argued that those theories have some validity, but are not the whole explanation. Elias Hinkley notes new research calculating that the majority of known fossil fuels will need to be left in the ground if the world is to keep the increase in average global temperature below the United Nations-agreed guard-rail of 2°C...

The full text of this article can be purchased from Informit.