More Cheap Oil Heading to Market Will Complicate Efforts To Curb Global Warming
Norway’s Johan Sverdrup oil field in the North Sea that just began production Photo: Equinor
Brazil, Canada, Norway, and Guyana are set to flood the global oil and gas market with an additional million barrels a day in 2020 and nearly a million more in 2021, thus driving down prices and slowing efforts to combat global warming by weaning consumers and industries off fossil fuels. According to The New York Times, experts predict that this will complicate efforts to gain greater adoption of electric vehicles, and will keep SUVs and other less fuel-efficient cars competitive.
Why This Matters: An increase in the supply of cheap gas could not come at a worse time for the global fight to curb greenhouse gas emissions — this will obviously have the opposite effect of a carbon tax. The price is now down to about $56/barrel — approximately half of what it was ten years ago before cheap American fracked shale gas hit the market. Domestic gas could eventually be priced out of the export market once the new glut of gas from foreign sources hits the pumps in China, Europe, and Latin America. However, in the short run, new pipelines coming on line in Texas are expected to increase United States exports from 2.8 million barrels a day to 3.3 million next year further exacerbating the oil glut. Exploration decisions have to be made well in advance — then once production begins it has momentum that can be hard to stop.
2020 Election Impacts
Ironically, the threat of a Democratic presidency in 2021 is causing increased fracking on federal lands as oil and gas companies grow concerned that there will be a drastic cut back on drilling on federal lands or a total ban on fracking as has been promised by both Senator Warren and Senator Sanders. According to the industry publication oilprice.com, the effect of this sort of ban would be to spike prices and smaller producers and servicers would go out of businesses, while larger companies would benefit from higher prices because they would offset these domestic losses with higher revenues from their oil and gas sales elsewhere.,