Cheap Equals Bad

This will come as no surprise to regular readers, I am not ecstatic that gas and oil prices are dropping (see previous post here). But today I read something that only backed up my feelings of dread on this subject. Here are a few snippets from Michael Klare's article that appeared on Salon explaining the problems with cheap oil:

1. The Price of Oil Will Remain Low Until It Begins to Rise Again. I know, I know: This sounds totally inane. It's just that there's no other way to put it. The price of oil has essentially dropped through the floor because, in the past four months, demand collapsed due to the onset of a staggering global recession. It is not likely to approach the record levels of spring and summer 2008 again until demand picks up and/or the global oil supply is curbed dramatically. At this point, unfortunately, no crystal ball can predict just when either of those events will occur.
   
2. When Prices Do Rise Again, They Will Rise Sharply. At present, the world enjoys the (relatively) unfamiliar prospect of a global oil-production surplus, but there's a problematic aspect to this. As long as prices remain low, oil companies have no incentive to invest in costly new production ventures, which means no new capacity is being added to global inventories, while available capacity continues to be drained. Simply put, what this means is that, when demand begins to surge again, global output is likely to prove inadequate. As Ed Crooks of the Financial Times has suggested, "The plunging oil price is like a dangerously addictive painkiller: short-term relief is being provided at a cost of serious long-term harm."
   
3. Low Oil Prices Like High Ones Will Have Significant Worldwide Political Implications. The steady run-up in oil prices between 2003 and 2008 was the result of a sharp increase in global demand as well as a perception that the international energy industry was having difficulty bringing sufficient new sources of supply online. Many analysts spoke of the imminent arrival of "peak oil," the moment at which global output would commence an irreversible decline. All this fueled fierce efforts by major consuming nations to secure control over as many foreign sources of petroleum as they could, including frenzied attempts by U.S., European, and Chinese firms to gobble up oil concessions in Africa and the Caspian Sea basin.