There’s nothing as immutable as the basic laws of supply and demand. Right? Well, a recent CNN blog post is saying not so fast. With worldwide demand for oil low, CNN’s blogger asks, “so why is oil trading high at $113 a barrel, more than twice the price it was trading at five years ago when the global economy was booming? What in the world is going on?”
Price of Fossil Fuels Will Continue to Rise
It seems that when it comes to oil prices, there are a lot of other factors beyond supply and demand at play and none of them are working in our favor to keep prices down. One of the main factors cited by the blog as responsible for keeping prices high despite decreasing demand is global politics. This includes not only wars, protests, and the like but also the threat of these actions, too. What’s even more troubling is that it also includes the incentives that oil producing nations lavish on their citizens to prevent these events from happening. These are hard costs that don’t go away when demand dwindles.
According to CNN, “Russia now needs oil at $110 a barrel to manage its finances. For Iraq, the number is $100. Even Saudi Arabia now needs oil to trade around $80 a barrel just to balance its budgets. The numbers are also high for Algeria, Qatar, and Oman.” Higher oil prices are needed to continue to cover these fixed costs, so ultimately these nations find ways to curtail supply to keep prices where they need them to be.
The Stable Nature of Clean Energy
All of this is very disheartening to consumers who have worked hard to conserve energy and manage their demand. When the rules of the game become too complicated or keeping changing, what are consumers to do? One great alternative is Clean Energy which relies on sources of energy such as solar, wind, geothermal and biofuel power. Clean energy represents a much more stable and sustainable source of power. While it’s not completely free of politics (what is?), clean energy does have suppliers—the sun, wind, and earth—that are far, far less likely to manipulate supply. Once a system has been installed, the price a consumer is paying for energy is essentially fixed. When the system is paid for, the energy it produces throughout its useful life, for all intents and purposes, is free and protects you against rising electricity prices.
In a world where we’re all looking to not only save money, but simplify our lives, clean energy makes a lot of sense.