Report Calls Low Oil Prices an Expensive Distraction from Future Energy Needs

Lower oil prices provide temporary relief for consumers, but rising volatility around oil prices will be a much bigger challenge to long-term energy market stability and could undermine a transition to clean energy, according to a new analysis prepared by the Global Commission on the Economy and Climate.

In a 20-page report from the multinational group's New Climate Economy project, economists warn that the recent drop in oil and natural gas prices, while providing short-term economic relief, may compel governments to authorize expensive fossil energy projects that ultimately prove much more costly under national and international carbon reduction systems.

Such priorities "would not only perpetuate our fossil fuel addiction which is fuelling dangerous climate change, but also make us even more exposed to oil price fluctuations in the future," the report states.

The analysis, led by Lord Nicholas Stern, the commission's co-chairman and professor at the London School of Economics and Political Science, finds that governments should take advantage of current low oil prices to initiate market reforms with long-term benefits, including the establishment of carbon pricing and reforming fossil fuel subsidies.

In a statement, Stern said, "Governments must peg their policies to long-term energy trends rather than betting on oil prices staying low. These prices have never been stable, and price shocks are becoming more drastic and frequent than ever before."

Rather than embrace that risk, "governments should boost investment in renewable energy sources that are increasingly competitive, moving away once and for all from the current outdated carbon-intensive and unsustainable economic model," Stern added. "Missing this chance would be devastating for the future health of our economy and our planet."

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