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The impact of low oil prices on economic growth
The power of political energy had shifted to the main producers of oil and gas rather than to consumers.
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After low and relatively stable prices lasting for two decades, suddenly in 2006 oil prices overshot to US$100 per barrel. (Shutterstock/-)
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n 2008, the National Intelligence Council (NIC) of the United States launched its book titled Global Trends 2025. The book highlighted forecasts of tighter energy competition in the global market.
Global oil demand was growing sharply mainly as a result of China’s double-digit economic growth; on the other hand, non-OPEC oil and gas sources such as from the North Sea were depleting.
After low and relatively stable prices lasting for two decades, suddenly in 2006 oil prices overshot to US$100 per barrel.
It was as if the world was on the brink of “peak oil” in which the reserves of oil and gas or hydrocarbon energy had “topped off.” Thus, it was expected that production would be focused in the low-cost but unstable Middle East area, where even Saudi Arabia’s oil and gas reserves were deemed to be fully utilized.
American geopolitical influence in the world was also viewed as fading. Increasing dependence on energy imports, together with rising prices had resulted in mounting psychological pressure on the US. The power of political energy had shifted to the main producers of oil and gas rather than to consumers.
The NIC analysts focused on the wrong technology although they did not neglect the probability of a technological breakthrough. They missed the main sources of alternative energy by emphasizing the potential of renewables such as solar, wind and hydro energy.
Eventually, they discovered the real technological breakthrough, the so-called shale-energy revolution. More than half of all the natural gas explored in the US derived from shale gas by 2015.
