People are driving less — as is oil consumption. So this might be the ideal time to address climate change because even oil companies have an incentive to leave oil in the ground. Photo by Mark Trahant
Oil is cheap … so leave it in the ground and address climate change
By Mark Trahant
Trahant Reports Could we be nearing the moment to really address climate change? A quick answer is “no.” Of course not. The Republicans in Congress are hell-bent on pretending that climate change does not exist let along agree to any shifts in policy. So they continue to fight for the approval of the Keystone XL pipeline. As the House Energy and Commerce Committee tells the story, the pipeline expansion “would carry up to 830,000 barrels of oil per day 875 miles from Alberta, Canada to Steele City, Nebraska. From there, the oil would go to refineries in the Midwest and Gulf Coast. The new pipeline would also transport some of the rapidly-increasing oil production from the Bakken formation in North Dakota and Montana.” But here is the thing: There is already a glut of oil and the idea of adding more makes no sense. As National Public Radio reported last week “there has been some concern that the U.S. will run out of places to put it all. Some analysts speculate that could spark another dramatic crash in oil prices.” How big a decline is an unknown. NPR quotes a Citigroup analyst saying $20 a barrel is possible. Others predict a continued fall in oil, to, say, $35 a barrel. Oil is a commodity and traded on public markets. So the price depends on perception about its supply and scarcity. One reason why there is so much oil out there is that people are using less. The Nation recently wrote that the Energy Information Administration “projected that global oil demand would reach 103.2 million barrels per day in 2015; now, it’s lowered that figure for this year to only 93.1 million barrels. Those 10 million “lost” barrels per day in expected consumption may not seem like a lot, given the total figure, but keep in mind that Big Oil’s multibillion-dollar investments in tough energy were predicated on all that added demand materializing, thereby generating the kind of high prices needed to offset the increasing costs of extraction. With so much anticipated demand vanishing, however, prices were bound to collapse.”
A report by USPRIG Education Fund says driving habits of Americans are unlikely to return to the free wheeling days. Source: A New Direction: Our Changing Relationship with Driving and the Implications for America’s Future
I happen to think the decline in consumption is a long-term trend. There are a couple of reasons for that. The first is that people drive less after 40 years old — and the Baby Boom is long past that. A New Direction Our Changing Relationship with Driving and the Implications for America’s Future, a 2013 report by the U.S. PIRG Education Fund found that “Americans drive no more miles in total today than we did in 2004 and no more per person than we did in 1996.” And, while Baby Boomers are less inclined to drive, the Millennial generation is thinking about transportation differently, “driving significantly less than previous generations of young Americans. Millennials are already the largest generation in the United States and their choices will play a crucial role in determining future transportation infrastructure needs.” Even if gas prices stay low these trends are not likely to reverse. As the New Direction report points out: “If the Millennial-led decline in per capita driving continues for another dozen years, even at half the annual rate … total vehicle travel in the United States could remain well below its 2007 peak through at least 2040—despite a 21 percent increase in population.” Of course Indian Country is unlikely to be included in this data. Too many reservations require driving because there are few other alternatives. And the price of gas determines how much we’ll have to spend on everything else. And the idea of cheap gas could help sell climate action. If it’s not profitable to pump oil right now, perhaps, oil companies will find a reason to delay investments in new projects. That means leaving carbon products in the ground for a better return on investment. This is already happening in Canada. TransCanada is giving up on plans for a new energy port and delaying one of its pipeline projects. On Tuesday the White House said the U.S. will double the pace of carbon reduction from 1.2 percent per year on average during the 2005-2020 period to 2.3-2.8 percent per year on average between 2020 and 2025. “This ambitious target is grounded in intensive analysis of cost-effective carbon pollution reductions achievable under existing law and will keep the United States on the pathway to achieve deep economy-wide reductions of 80 percent or more by 2050,” the White House said. And Keystone XL? I don’t see how the White House could justify this project on economic or climate grounds. And especially now because the only way to reach those targets (which most experts say is only a modest improvement) is leave oil right where it is. And now, for a moment at least, it’s the interest of oil companies to do the same. So long live $20 oil. And let’s leave it in the ground. Mark Trahant holds the Atwood Chair at the University of Alaska Anchorage. He is an independent journalist and a member of The Shoshone-Bannock Tribes. For up-to-the-minute posts, download the free Trahant Reports app for your smart phone or tablet.
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