the global oil market

FT columnist Martin Wolf explains that oil prices have fallen sharply due to increased supply, resulting especially from rapid growth of US shale oil production.

The problem is not that the world is running out of oil. It is that it has far more than it can burn while having any hope of limiting the increase in global mean temperatures over the pre-industrial levels to 2°C. Burning existing reserves of oil and gas would exceed the global carbon budget threefold. Thus, the economics of fossil fuels and of managing climate change are in direct opposition. One must give. Profound technological change might undermine the economics of fossil fuels. If not, politicians will have to do so.

Martin Wolf, “Understanding the new global oil economy“, Financial Times, 2 December 2015 (metered paywall).

What is needed is elimination of oil subsidies along with new carbon taxes. Low oil prices make these changes much easier to implement. “But,” writes Martin,  “this important opportunity has been almost entirely missed.”


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