Some time ago I had these thoughts about the high price of crude oil and the implications for the energy market. Well, the price of oil has been falling, rather fast, these past few months. High prices have forced people and businesses to economise on their use of oil. Sales of large-engine cars and SUVs are down. A perceived slowing in the pace of global economic growth is also hitting the price. New sources of supply, and spending on new refinery capacity, is also pushing prices down. Some of the speculative froth in the market which may have added to the high price of oil is also unwinding a bit.
The rise in the price of oil to nearly $80 a barrel last year triggered all manner of near-hysterical claims about how governments must act to drastically reduce our reliance on such a source of energy. But market participants were acting even as political and media blowhards predicted doom and gloom. There is nothing like a fast rise in the price of a key thing like energy to focus minds on how to adjust behaviour. The rise in the price of oil has spawned a plethora of ventures to develop new sources of energy; encouraged new drilling and exploration efforts to find new oil supplies, and encouraged people to economise on their energy consumption.
With any luck, if oil keeps falling, it will slow the flow of money into the coffers of thugocracies like Saudi Arabia and also crimp the ambitions of Hugo Chavez in oil-producing Venezuela. That has to be a good thing, although George Galloway might have a problem if oil-rich dictators lose some of their revenues.