Oil prices hit the lowest point in more than a year this week, and could continue dropping as demand decreases amid the global economic recession. With oil now trading below $70 a barrel less than half the price at its peak just a few months ago it makes the threat of $200 a barrel seem distant.
As one analyst notes to the Wall Street Journal, that decline in prices amounts to a $275 million economic stimulus for the American economy.
What does it mean for the transition away from oil and other fossil fuels, though?
The silver lining in the historic rise in oil prices was that it made American consumers rethink their choices. The SUV era came to a sudden end, as demand for fuel-efficient cars grew. New vehicle breakthroughs, like the development of electric plug-in hybrids, have a much wider audience.
So now what?
With the economy on an apparent downturn that might be protracted, the desire among some segment of Americans to "go green" for the sake of the environment might wane. But the cost-savings of energy efficiency and employing the "reduce, reused, recycle" mantra will appeal to that many more. And congressional mandates for vehicle efficiency, coupled with the writing on the wall that oil prices are destined to rise in the future worldwide demand is still forecast to increase by 500,000 barrels a day next year means the SUV is unlikely to make a quick resurgence.
For now, the lower oil prices should give many northern homeowners a break on winter heating, but even they will see the benefits of investing in insulation, windows and other improvements to make the most of the fuel they burn.
Oil companies, meanwhile, may be reluctant to invest in new exploration or capacity even with Congress and the President having opened up the U.S. coasts to offshore drilling for the first time in decades.
Meanwhile, according to at least some analysts, neither the rising price of oil nor the financial crisis has taken much steam out of investments in "clean tech," which attracted $2.2 billion in investments in the first half of 2008 and is expected to account for 11% of total investments. And investing in energy efficiency programs, and renewable energy technology research and development, is increasingly being seen as the best hope for a new industrial revolution that would create millions of jobs and reverse the economic slide.
But, like the price of oil itself, every prediction seems volatile these days. We'll have to wait and see.
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