Saudi Arabia has been in the oil business for a long time. They have a lot of oil in the ground left to pump. They want to keep you buying oil so they can make money. In a nutshell, that’s a good part of the reason they flooded the market with crude production, driving down the barrel price and pushing many small and marginally high-priced drillers out of business.

Americans and others will continue to buy oil products if the price is low compared to alternatives such as solar and wind power. Does the cost of a battery-powered car, even a hybrid, catch your financial fancy now that the price of gas is down? Probably not as much.

One side benefit of re-establishing the primacy of oil as the basis for motor vehicle power generation (gas and diesel) will be to keep the Saudis (and others) in business for longer, selling product at a reasonably good margin. Allowing alternative power sources in the marketplace will drop income, a result to be avoided.

Finally, every good thing has to come to an end and the oil will eventually run out. The recent announcement by the kingdom to form the world’s largest sovereign fund with expected investment income replacing oil revenues is an attempt to be proactive and realistic. It’s just as important for technology to drive advances and seek a seamless transition to alternative power sources at reasonable prices. That work may be what some of those sovereign fund dollars can enable.

F. Gerard Nault

Windsor

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