{"id":15686,"date":"2015-12-26T09:06:31","date_gmt":"2015-12-26T14:06:31","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15686"},"modified":"2015-12-26T09:06:31","modified_gmt":"2015-12-26T14:06:31","slug":"why-big-oil-should-kill-itself","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15686","title":{"rendered":"Why Big Oil Should Kill Itself"},"content":{"rendered":"
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Why Big Oil Should Kill Itself<\/a><\/h3>\n

LONDON \u2013 Now that oil prices have settled into a long-term range of $30-50 per barrel (as\u00a0described here<\/a>\u00a0a year ago), energy users everywhere are enjoying an annual income boost worth more than $2 trillion. The net result will almost certainly\u00a0accelerate global growth<\/a>, because the beneficiaries of this enormous income redistribution are mostly lower- and middle-income households that spend all they earn.<\/p>\n<\/header>\n

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Of course, there will be some big losers \u2013 mainly governments in oil-producing countries, which will run down reserves and borrow in financial markets for as long as possible, rather than cut public spending. That, after all, is politicians\u2019 preferred approach, especially when they are fighting wars, defying geopolitical pressures, or confronting popular revolts.<\/p>\n

But not all producers will lose equally. One group really is cutting back sharply: Western oil companies, which have announced investment reductions\u00a0worth about $200 billion<\/a>\u00a0this year. That has contributed to the weakness of stock markets worldwide; yet, paradoxically, oil companies\u2019 shareholders could end up benefiting handsomely from the new era of cheap oil.<\/p>\n

Just one condition must be met. The managements of leading energy companies must face economic reality and abandon their wasteful obsession with finding new oil. The 75 biggest oil companies are still investing\u00a0more than $650 billion annually<\/a>\u00a0to find and extract fossil fuels in ever more challenging environments. This has been one of the greatest misallocations of capital in history \u2013 economically feasible only because of artificial monopoly prices.<\/p>\n

But the monopoly has fallen on hard times. Assuming that a combination of shale development, environmental pressure, and advances in clean energy keep the OPEC cartel paralyzed, oil will now trade like any other commodity in a normal competitive market, as it did from 1986 to 2005. As investors appreciate this new reality, they will focus on a basic principle of economics: \u201cmarginal cost pricing.\u201d<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Why Big Oil Should Kill Itself LONDON \u2013 Now that oil prices have settled into a long-term range of $30-50 per barrel (as\u00a0described here\u00a0a year ago), energy users everywhere are enjoying an annual income boost worth more than $2 trillion. The net result will almost certainly\u00a0accelerate global growth, because the beneficiaries of this enormous income […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3],"tags":[2688,2232,328,1357,1729,592,1775,8402,3929],"class_list":["post-15686","post","type-post","status-publish","format-standard","hentry","category-energy-2","tag-big-oil","tag-climate-agreement","tag-fossil-fuels","tag-global-growth","tag-oil-and-gas-industry","tag-oil-price","tag-oil-price-collapse","tag-project-syndicate","tag-stranded-assets"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15686","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15686"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15686\/revisions"}],"predecessor-version":[{"id":15687,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15686\/revisions\/15687"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15686"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15686"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15686"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}