海角大神

Beware the allure of cheap oil.

Crude prices may have slipped some 60 percent since last June to below $50 a barrel, encouraging motorists to buy SUVs and potentially eroding demand for alternative fuels. But when it comes to oil, what goes down likely must come up, US EIA administrator Adam Sieminski said at a Monitor-hosted conversation Wednesday in Washington.

Eventually, cheap prices will drive up demand for oil. The glut of oil will leave the market, and prices will likely find a new equilibrium 鈥� and because the drop in crude prices isn鈥檛 here to stay, consumers and investors should plan accordingly.

鈥淚t鈥檚 happened before, and it probably isn鈥檛 going to be permanent,鈥� Mr. Sieminski says of cheap oil, citing the cyclical nature of the ever-fluctuating commodity.

Mr. Sieminski鈥檚 talk Wednesday was part of the launch of Recharge, the Monitor鈥檚 free weekly newsletter on global energy. Falling global oil prices, scaled-back US shale drilling plans, and a flurry of oil and gas policy shake-ups out of the Obama administration set the tenor for the event. Here鈥檚 a round-up of what Sieminski addressed:

Three big ideas:听

1. Low oil prices are not here to stay. Sieminski put the current situation in perspective: 鈥淭his is the sixth time in my career we鈥檝e had an oil price crash,鈥� he says, and prices have rallied as many times as they鈥檝e fallen. Though he doesn鈥檛 expect oil prices to stay low, Sieminski declined to predict when prices will rise or where they鈥檒l find equilibrium. 鈥淢aking price projections is just about as risky as weather forecasts,鈥� he says.

听

2. Cheap oil鈥檚 impacts go beyond North Dakota and Texas. Though marginal producers in shale plays from North Dakota to Texas take the toughest hits amid low prices, the rest of the economy isn鈥檛 off scot-free. The steel industry will contract as drilling companies scale back and require less pipe, Sieminski says, and other effects will ripple through the broader economy. Still, cheap crude is likely a net-positive for the US, Sieminski says, and not just for consumers who will save more than $700 next year because of cheap gasoline. 鈥淭he drop we鈥檝e seen in energy prices is probably going to add to the GDP numbers in 2015 to a significant level,鈥� he says.

3. Renewables aren鈥檛 imperiled by cheap oil and natural gas. Bottom of the barrel prices on oil and natural gas make buying them more appealing, but that , as the Guardian reported after the event. For one, renewable sources of electricity like solar and wind don鈥檛 often compete directly with oil, which more commonly fuels transportation than power plants. Second, many states already have goals and policies in place to support or require investment in renewables, and cheal oil won鈥檛 change that. And third, as Sieminski points out, the push for renewables and eco-friendly electric cars isn鈥檛 just market driven 鈥� there鈥檚 also a social component, a desire to be green. 鈥淚s the growth in all electric vehicles really being driven by gasoline prices, or is it social?鈥� he asked.

Two notable quotes:

In response to Obama鈥檚 plan to restrict Arctic drilling and open Atlantic drilling: 鈥淎nything that鈥檚 associated with leasing activity on the outer continental shelf is probably something that鈥檚 ,鈥� Sieminski said, adding that, in the current environment, already 鈥渃ompanies are struggling to maintain capital investments in their shale and conventional plays in the US.鈥�

On cheap oil: 鈥�,鈥� Sieminski said. 鈥淲e should learn 鈥� all of us, and this includes me and all of the Energy Information Administration 鈥� that just because something lasts for three or four years doesn鈥檛 mean it鈥檚 forever.鈥�

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