Low oil prices and the environment – Experts respond

Cheaper petrol prices may be great for Kiwis filling up at the pump, but what are the wider implications of cheaper oil?

Credit: Flickr / XcBiker
Credit: Flickr / XcBiker

The global price of crude oil has more than halved in the last year to US$49 per barrel, offering fuel savings for consumers and businesses alike.

But could cheaper fossil fuels undermine efforts to rein in our emissions or develop cleaner technologies?

The SMC collected the following expert commentary on the impacts of global oil prices. Feel free to use these quotes in your reporting. If you would like to contact a New Zealand expert, please contact the SMC (04 499 5476; smc@sciencemediacentre.co.nz).

Professor Ralph Sims, School of Engineering and Advanced Technology, Massey University, comments:

“Very little oil is consumed in New Zealand for electricity generation or for the heating of buildings or industry. So only the transport sector will be affected by lower oil prices.

“Everyone likes the thought of saving money from cheaper petrol and diesel, but very few people will consider the increased carbon footprint that driving further and buying bigger cars will have as a result. Cheaper fuels will no doubt encourage Transport Minister Simon Bridges to push harder on his ‘roads of significance to National’ policy whereas his other role of Associate Climate Change Minister will no doubt be forgotten.

“Reducing transport emissions in the short term will be critical if New Zealand is to meet even its relatively unambitious 5% reduction in greenhouse gas emission target by 2020, never mind the more stringent reduction targets that will be needed beyond then. The lower oil price will certainly not encourage many people to shift out of their large cars to lower-carbon transport modes of travel, to walk or cycle more and gain the health benefits too, or to reduce unnecessary journeys.

“But such short term thinking is not the answer because: a) the oil price will rise again but no one can predict when due to the volatile nature of the market, future conflicts, and improved oil extraction technologies; and b) climate change impacts will probably eventuate faster than predicted and affect all of us in many ways.

“So the question begs: how can we ever get politicians and the general public to consider the long term issues resulting from our actions versus the short term benefits of saving a few dollars?

“But what many fail to realise is that the fuel is only a small part of the overall costs of owning and running a car. Take, for example, a new 1500-2000 cc car doing 14,000 km per year over a 5 year period. When petrol was at $2.28 a litre, the total costs worked out at around $9,100 per year (AA 2014 cost analysis).

“If the petrol price continues to drop, even by half to $1.14 per litre, then the total car running costs will still remain high at around $8,000 per year. For a large diesel car over 3,000cc, the similar costs are $15,200 per year that only reduces to $14,100 when running on diesel at half the price that it was.

“I think I’ll stick to riding my bicycle!”

Professor John Raine, Pro Vice Chancellor – Innovation and Enterprise, AUT University, comments:

Will lower prices lead to an increase in emissions?

“Possibly, slightly in the short term if energy purchasers feel less inclined to use energy efficiently, and are more relaxed about long car journeys. However, worldwide awareness of limited energy resources and climate change would, one hopes act as the dominant force influencing user behaviour and technological developments, so that emissions per capita should reduce over time.  The challenge is reducing gross emissions as countries such as China and India become wealthier and produce more emissions so that worldwide emissions increase.  This effect would in my view swamp any effect from what is likely to be short-lived drop in oil prices.

Will cheaper fossil fuels set back the development of renewable energy technologies?

“I don’t think so. Most will regard the current price drop as a perturbation in an otherwise rising price trend as oil becomes more expensive to prospect for and extract from the earth.

“Public awareness of environmental degradation and climate change likely coming from activities of human beings would encourage technological developments towards greater energy efficiency and alternative forms of energy regardless of the current lower price of oil.

“The automotive industry will not in my view relax the strenuous CO2 targets for future vehicles, and while some alternative energies such as solar power could experience a brief uphill period,  I doubt that any people in the energy industries regard the present lower prices as anything but a short term event that should not influence developments of clean, alternative energy systems.

“Focusing purely on motor vehicles, it could be expected that if fuel prices stayed lower for say 12 months, the uptake of hybrid and electric vehicles may slow temporarily, but I still see the present lower prices as a temporary event that will not endure long enough to  induce any sense of complacency in the public or divert the automotive industry or alternative energy companies from current plans. I might be slightly concerned about government legislation towards cleaner high efficiency technologies losing momentum, but one would hope that governments would be advised to take the medium-long term view.”