Publications: Notes at the Margin

Oil's New Future: The Need for an "Ehrlichman Moment" (March 28, 2015)

 

Attempts to restore stability using the policy tools of the past and/or postponing the inevitable demise of the Big Oil companies will only worsen problems in three or four years. Petroleum can have a great future. However, its full potential can only be achieved by letting the price decline run its course over the next decade. This requires continued production without controls, the low prices that necessarily go along with such output, the bankruptcies of many companies, including several majors, and more than one political revolution. The alternative strategy of attempting to hold up prices and prevent uncompetitive firms from failing will limit oil’s future. Global efforts to constrain hydrocarbon use will be enhanced. High-cost producers will gain at the expense of the most efficient. Then, in a few years, a second and maybe even a third price collapse will follow, causing even greater damage.

 

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