Discourage or encourage drilling, refining, and consuming oil for energy. Oil is a fossil fuel that is used widely in cars, ships, and planes; it is also used for industry, heating, and electricity. Access to oil has sparked major conflicts, and oil spills threaten ecosystems and water quality.
- Governments imposing limits on oil drilling and exploration, removing subsidies, and taxing oil.
- Universities, corporations, and individuals divesting from oil companies.
- Financial services industry (e.g., banks) or global development institutions (e.g., World Bank) limiting access to capital for exploration, drilling, refining, and delivery.
- When a steep oil tax is the only action implemented, you will not see a dramatic change in temperature, as coal and natural gas demand increases in response, offsetting any large reduction of temperature.
- When oil is discouraged, by taxing it, watch the red line go down in the “Global Sources of Primary Energy” graph.
- When oil is taxed, notice what happens to coal and gas in response. Unless there are restrictions on coal and gas, their demand will go up in response to expensive oil. We call this the “squeeze the balloon” problem – depressing fossil fuel emissions in one area causes them to pop up in another. Renewables are also boosted slightly, but the impact is negligible. Adding a carbon price is a good solution to the “squeeze the balloon” problem, as it addresses all fossil fuels together.
- The net result of taxing oil is no change in overall greenhouse gas emissions and no reduction in future temperature.
- Notice that taxing oil results in an increase in electrification of the vehicle fleet as electric powered modes of transport become more affordable in the face of higher oil prices. See this demonstrated in the “Electric Share of Final Energy-Transport” graph.
Potential Co-Benefits of Discouraging Oil¶
- A reduction in oil drilling could lead to fewer oil spills, helping protect wildlife habitats, biodiversity, and ecosystem services at production sites and along transportation routes.
- Reduced economic dependence on oil can improve national security and lower military costs.
- The oil industry provides many high-paying jobs for people with technical trade backgrounds. Providing pathways for these people to find new jobs will be essential.
- Oil companies wield enormous economic and political power locally and globally. In order to discourage oil, certain industry protections must be eliminated.
- There is a history of oil refineries being located in marginalized communities and companies working to avoid or limit environmental regulations.
The following table highlights the numerical ranges for the labelled input levels of the Oil slider. Each of the energy supply sliders is set to reflect a similar percentage cost increase or decrease for each input level.
|very highly taxed||highly taxed||taxed||status quo||subsidized|
|Change in price per barrel of oil equivalent (boi)||+$100 to +$30||+$30 to +$15||+$15 to +$5||+$5 to -$5||-$5 to -$15|
|Cost increase or decrease||+200% to +60%||+60% to +30%||+30% to +10%||+10% to -10%||-10% to -30%|
The cost of oil affects three significant decisions regarding energy infrastructure:
- Investment in new capacity (whether or not to build new drilling operations and refineries);
- use of capacity (whether to run existing operations);
- retirement of capacity (whether to keep infrastructure longer or shorter than the average of ~30 years).