Conservation, Eco-friendly, Environmental Hazards

What Do Lower Oil Prices Mean for the Environment?

A gas pump filling a car
How do oil prices actually affect the environment?
Images: Shutterstock

Do lower oil prices automatically mean bad things for the environment? The debate is open again, as the global price of oil plummeted 31% in the last five months, down from a four-year period of about $100 a barrel.

The argument in the past has been that lower prices of fossil fuels mean a higher demand and therefore more oil use and carbon emissions—a definite negative for the environment. But with current oil prices at around $75 per barrel, the price could very well be right for a slightly more positive view.

“Low prices keep the dirty stuff in the ground,” said Ashok Gupta, director of programs at the Natural Resources Defense Council. The idea is that if so much fossil fuel is available already, what has already been processed can cover the world’s needs, meaning that new oil deposits remain untapped.

And while some, like economist James Stock, suggest that low prices always mean skyrocketing demand, recent studies actually show that increased demand is not expected at the moment: While the Energy Department predicted that the price of oil will fall 13% next year, they said demand is also likely to fall.

Of course, if oil prices go too low, that could foster less interest in developing alternative fuels (Why develop alternative sources when oil will suffice?).

And as demand for oil in developing countries has increased in the last decade, oil companies have struggled to keep up, broadening their reach to include drilling in more environmentally sensitive areas.

It’s still unclear how exactly oil prices will affect future developments in alternative energies and oil use. At the moment, it seems not to be entirely negative—or entirely positive.

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