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The Environmental Downside of Falling Oil Prices

Ben Adler of Grist writes how falling oil prices will affect climate change. Cheaper gas prices may encourage more driving and more truck sales at the expense of hybrid, electric, and fuel efficient cars, but the news may not be all bad.
October 31, 2014, 9am PDT | Irvin Dawid
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The media has mostly written about the economic benefit brought by falling gas prices. "It is estimated that for every one cent decline in gasoline prices (sustained over one year), $1.4 billion is added to the economy," writes The Hill contributor, David Russell, Jr.

But Adler reminds us of two considerable environmental downsides: "(M)ore gasoline burning and less investment in cleaner alternatives and technologies" which will increase greenhouse gas emissions.

Low oil prices reduce the financial incentives to use less oil or switch away from it. That could slow or even reverse the current trend of declining emissions caused by reduced driving and more fuel-efficient cars.

Falling gas prices do not bode well for President Obama's rigorous fuel efficiency standard of "54.5 mpg by 2025 standard" that contributed to U.S. gasoline consumption peaking in 2004.

American automakers don’t improve efficiency unless they’re forced to. Drivers in the U.S. have prized other features, like size and speed, over fuel economy, and the auto industry has shortsightedly fed their gluttonous appetites. 

Even before the precipitous drop in oil prices, hybrid sales were falling, and the auto market began shifting from an emphasis on fuel economy to performance as Michael Sivak's research from the University of Michigan indicated. EPA will conduct a mid-term review of the standard in 2017, and gasoline prices south of $3 per gallon may not bode well to retain it.

While the media has indicated that the reason why Saudi Arabia has not cut its production (to keep prices higher) is to retain market share, Adler speculates a more sinister reason: "(T)hey may benefit more in the long run from keeping prices low enough that we do not free ourselves from oil dependence."

The one up-side to falling oil prices may be that some of the dirtier, more carbon intensive forms of oil, such as tar sands, or energy-intensive forms or extraction, such as fracking, may initially no longer be economical due to higher extraction costs. 

Deborah Gordon, director of the Energy and Climate Program at the Carnegie Endowment for International Peace describes the "four categories of crudes that pose the biggest climate gamble" for The Hill.

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Published on Monday, October 27, 2014 in Grist
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