Blog : Low oil prices – is it just me?

Ian Nicholls

Fuel costs

The recent turmoil in the world stock markets has been attributed to the low price of oil which, we are told by all the clever people, is bad for us.

Excuse me? Since when has the low price of fuel been bad for us? Granted, if I worked in the energy industry, or had investments in it, I might be bricking it but, as I verge on the brink of old git-dom and have a birthday with a big zero at the end this year, I can remember the chaos and disruption big hikes in the cost of energy caused to ordinary people’s lives.

Only a year ago, in the run up to the UK General Election, the opposition Labour Party was talking about a ‘cost of living crisis.’ Now, however one voted on that occasion, it was not a claim without foundation. The energy suppliers seemed to be hiking up prices on a regular basis, making life hard for millions in post-banking crash Britain. And there seemed to be no respite.

When the Arab oil-producing nations first hiked up the price of oil in October 1973, it sent the western world into panic mode. The media branded it an ‘Energy Crisis’, UK car sales dropped 30 per cent, petrol rationing was introduced in Britain, the world was racked with inflation and various hare-brained alternative energy sources were investigated.

By 1979, the West had realised that nothing could compete in terms of convenience and price with extracting oil from the Middle East, transporting it across the seas and refining it into petrol and diesel. Even the further oil price rise resulting from the 1979 Iran –Iraq war did nothing to dispel this notion, although millions of people across the world found themselves thrown out of work as a consequence of the resulting recession, and many probably never worked again.

More recently the hike in oil prices has been attributed to demand for cars from China and India. I presume we are supposed to think that the oil is on the verge of running out and that the West is engaged in a bidding war with China and India? More and more people switched to diesel-powered cars in the belief that they were better value for money.

Once again alternative sources of energy have been investigated, though the electric car seems to have progressed little since the Central Electricity Generating Board experimented with a Mini Van with batteries installed in the load carrying area.

Anyway, back to my original point. Having a nasty, cynical old mind, and remembering the chaos caused by hikes in the cost of oil, I refuse to accept that low oil prices are bad for us, or is it just me?

Keith Adams


  1. Hi . Being a fully paid up member and secretary of the Grumpy Old Gits brigade ( Yorkshire Branch ) , I have to fully agree with all you have said. Is there some strange force at work that is trying to brain wash us all in this totally bonkers world we live in?

  2. I was puzzled by the last sentence as well.

    Unless you are a stockbroker or from a country that exports a large amount of oil I can’t see why low oil prices are a bad thing.

    It reminds me of the Reagan/Thatcher-nomic argument that low taxes for the rich benefits us all.

    Electric cars have made some progress in the last 10-15 years but still a niche product.

  3. The economy doesn’t like deflation. It means people will wait to purchase until prices fall further as we might get things even cheaper. To the point where drive around without any fuel, obviously.

  4. ‘the electric car seems to have progressed little since the Central Electricity Generating Board experimented with a Mini Van with batteries installed in the load carrying area’.

    Things have moved on a bit more than that?!

    Have you missed the Prius, Mitsubishi Outlander, BMW i3, Merc B Class E drive, Ford Focus Electric or the Tesla Model S?

    And as this is a British facing site, how about the Morgan EV3, BMW i8 (UK made engines) Detroit Electric SP:01, Delta E4, Nissan Leaf and Metrocab, all designed and/ or made in the UK!

  5. And in buses too – like the electric Optare solos made by part of Ashok Leyland in North Yorkshire, with drive lines by Magtec of Sheffield.

  6. The spark that lit the fuse for this blog occurred on Wednesday night, when I watched the BBC 6 o’clock news. I was exasperated by all the bullshit emitting from all the pundits, amid claims of impending doom.
    One of the driving forces behind all the detailed articles I write for this site is a healthy cynicism towards the accepted line, and the claim that low oil prices was a bad thing had me in a state of increduality, that we were supposed to swallow this hook, line and sinker.

  7. There is nothing wrong with low oil prices – except if you live in Aberdeen or Saudi.

    We can say the same about China: only a year ago, the ‘experts’ (ha!) were warning that double-digit growth there was unsustainable. A year on, China duly delivers growth of ‘only’ 7% and the same ‘experts’ are predicting Armageddon.

    Trouble is, good news doesn’t sell newspapers – or, in this day and age, get clicks. Faced with vanishing ad revenues, our media are getting ever more demented in their coverage of just about anything in order to attract attention. It’s infantile, unhealthy and depressing. Cynicism (and a subscription to Private Eye) is indeed the order of the day.

  8. It’s the same with the exchange rate; When Sterling is strong the press opines that exports will be more expensive (what exports? Though that’s another thing) and it’s a disaster, conversely when Sterling is weak then Wayne and Waynetta’s holiday in Magaluf is going to cost them more and it’s a disaster. All it really means is that whichever way it moves, some parasite in the City is going to make money.

  9. There are an awful lot more folk than just those employed in either Aberdeen or Saudi depending on oil/gas/petrochem revenue. As I sit here in the West Midlands, we (and most of our customers) rely on the industry and the investments made in infrastructure. A small rise in oil to make the more local industries viable again would be invigorating for the industry without annoying too many “old gits”.

    As an aside, I have a V8 P6 so the cheaper fuel is good for me too and I would sooner stick burning pokers in my eyes than have an electric car.

  10. Imagine a future where you visit friends/relatives in your electric car and the first thing you do when you get there is plug your car into their mains electricity so you can get back after indulging in their hospitality!

  11. Low oil prices are good for us at the pumps but they highlight what is a grave situation – lower fuel process mean less being used, which in turn means downturn in industrial production. This in turn leads to investors getting jittery and less money being available to invest – meaning job shredding, meaning less fee money in the economy.

    In today’s joined together world where we all rely on each other to keep going, the old adage that a butterflies wing causes a storm elsewhere is becoming reality. Britain’s recovery has been based on exporting to growing markets, like China, however as some of these markets slow down this will affect us. Yes JLR have stated that the slow down in China hit sales there, but has been boosted by sales in the US and Europe. However this is only a short term pick up as the slow down in the developing world will hit these markets.

  12. I think the potential problems are longer term and being harder to predict makes them no less scary. Low oil prices mean that the countries for whom it’s easy to extract will drive others (including us) out of the business. Those countries all seem to be places where political stability and democracy are never seen in the same room together.

    We are then fully dependent for our energy on places than can go up in a puff of smoke at any time. Putting aside how bad that is for the people who live there, we are far from controlling our own destiny.

  13. Low oil prices are welcomed by those who think we live in a world of unlimited resources.
    The benefit of high oil prices, an incentive to engineer high-mpg cars, fewer road accidents /casualties as drivers reduced speed and reduced car use

  14. I’m not complaining about paying 99 pence a litre, after three years of petrol at £ 1.30-1.40 a litre. I’ve noticed since I’ve bought a more economical car and petrol prices have fallen in the last 18 months, I’m now saving about £ 50 a month on petrol. Other people have noticed the difference and it has helped reduce inflation to around zero and contributed to the supermarket price was as fuel prices fall.
    Growing up in the early eighties, I know too well what a massive jump in energy prices caused, inflation at 20 per cent for a time, 17 per cent interest rates and a huge recession, where as Keith points out above, some people never worked again. ( There were other factors at work such as deindustrialisation, the rise in popularity of imports due to a strong pound, and some would say, with some truth, the economic policies of the time).

  15. Of the main players, with known reserves of crude, Saudi is the low-cost extractor,…by a wide margin, when the price goes below $50 a barrel, Saudi is one of the few producers can extract and not sell at at a loss.

  16. If people start buying larger vehicles with higher fuel consumption it’s a problem because energy prices will recover in the long term.

    UK fuel taxes are much higher than the US so price spikes tend to be much larger here percentage wise. On the west coast petrol is about 40% of what it was in winter 2008 when it was nearly $5 / US Gallon.

    One of the catalysts for the home mortgage default crisis in autumn 2008 was people in the outer suburbs who couldn’t afford to drive their sub-prime financed gas guzzler truck to work .

    Unfortunately many people have short memory. I already see a lot more really big new trucks around, you couldn’t give those vehicles away in 2008.

  17. The US car market seems to be affected by gas prices, with smaller cars selling better when prices are high, & when it drops bigger car sales pick up.

  18. Although there’s some truth in statements about there being plenty of untapped oil resources, many of these are in areas that present ‘difficulties’ – for example deep sea drilling or from Canadian tar sands. Both these resources are very costly to pursue (and in the case of deep sea drilling in particular very risky too) and since the price of oil has dropped, Shell, BP etc. have started mothballing these programmes. This is great for the environment, reducing oil spills, the destruction of the Canadian Boreal forests and amount of energy ‘spent’ making tar sands usable, but for current worlwide oil use to continue these projects are going to be a necessary investment at some point. I’m not much of an economist but I’m aware that worldwide ‘ordinary’ markets tend to get jittery at uncertainty which I presume what’s happening with such seemingly necessary projects being put on hold – they’re risky enough as it is and now the risks of them not performing when needed are projected that much further into the future.

    Frustratingly, too, although the cost of renewable energy has come down considerably it’s ability to attract investment and research funding is as far as I’m aware dependent upon it achieving cost parity with oil which a dropping oil price makes harder. I presume the same is true of investments needed to develop the current first generation mainstream electric cars (Nissan Leaf, Teslas etc.) from acceptably competent and appealing to early adopters to something truly in competition with ICE powered cars.

  19. I can remember when petrol reaching £ 1 a gallon in 1979 was considered terrible. However, in real terms, petrol prices aren’t much more than in 1979 and since most cars now will better 40 mpg, when 30 mpg was the norm in 1979, cars do cost less to fuel. Also it’s now possible to buy a hybrid family car like a Toyota Corolla that can reach 80 mog, unthinkable 40 years ago, or even 10 years ago.

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