No, that title is not a misprint. While everybody likes cheap energy and most economists believe that economic growth is predicated at least in part on cheap access to energy, it does not automatically follow that there is no good that can come from higher energy prices. Markets are made up of multiple independent agents and what constitutes a challenge for one can be an opportunity for others. (Learn a little more about the “non” part of this nonrenewable resource. Check out :
1. Some Sectors ThriveIt probably counts as obvious that there are sectors that thrive when oil prices march upward. High prices for oil fuel the same sort of process as in any other sector; suppliers look for ways to provide more of the product and take advantage of those higher prices. For energy, then, that means opportunities for companies involved in exploration (seismic survey, for instance), drilling, production and servicing.
2. New Technologies Become ViableCheap oil is problematic for companies and industries looking to supplant oil. While most people can agree that there are vague and nebulous costs associated with accessing and utilizing oil (pollution, for starters), the United States has been reticent to translate those costs into higher energy taxes. What’s more, it is not clear that higher taxes on fossil fuels in Europe and much of Asia really do anything to mitigate environmental damage beyond reducing consumption. All in all, then, when oil prices are low it is very hard for cleaner energy technologies to compete effectively on price.
3. Changes in BehaviorFor those who believe that burning oil (and other hydrocarbons) is generally a bad thing, higher prices that lead to lower use has to be counted as a benefit. When people are faced with higher prices and no obvious substitutes, they will consume less assuming that their demand is relatively elastic.
4. Alternatives Come to the ForeIf increased exploration and production is a normal byproduct of higher oil prices, so too is substitution. When Nazi Germany faced oil shortages in World War II, methods of producing oil, diesel and gasoline substitutes from vegetable oils, animal fats and coal were thoroughly explored. Likewise, the oil crisis of the 1970s gave the development of ethanol in Brazil a major boost.
In the United States there really are few short-term alternatives to oil. Technology exists to supplant oil with natural gas in many applications, but those switchovers only make economic sense in the face of persistently higher oil prices. Likewise, coal and biomaterials (switchgrass, etc.) can be pressed into service, but again only make sense as alternatives if oil prices are quite high and seem likely to stay there.