In any other U.S. election year, a drastic decline in the price of gasoline in the last few months before voters headed to polls would bring the conspiracy theorists out of the woodwork. Yet here we are in the middle of October, with the average price of a gallon of gasoline having fallen almost 25 percent since July (4.3 cents overnight between Monday and Tuesday), and hardly anyone is making a peep.
There are obvious reasons for this: Financial market chaos and bazillion-dollar banking system bailouts are distracting. The price of a barrel of crude may be falling fast (it closed at $81 on Tuesday) but the Dow has been falling faster. We also have a clear explanation for the drop in the price of oil and gas: A worldwide economic slowdown is depressing demand and popping all kinds of commodity price bubbles. No conspiracy theory necessary. Recessionary winds are blowing out inflationary fires.
Not too long ago, I wondered whether the slumping price of oil might hamstring efforts to reduce fossil fuel consumption. If gas prices fell far enough, would Americans attempt to breathe new life into their SUV love affairs? But that doesn't seem to be a high priority for fussing about at the moment. Even if a would-be car buyer could qualify for financing right now -- a doubtful prospect for millions of Americans -- judging by consumer spending figures, belt-tightening is the order of the day. Economic turmoil has even gutted the potency of the one campaign issue with which the McCain campaign enjoyed real success: offshore drilling.
Ironically, the pressure to pass a bailout bill became so intense that Congress was able to package long-delayed renewable energy tax breaks and incentives into the legislation, which means that even as the lower price of oil wreaks havoc on clean energy business models, solar power, at the very least, is set to boom for several years. This is a very good thing: as California Gov. Arnold Schwarzenegger told an audience at the Solar Power International conference in San Diego on Monday night, "We should not give in to those who say environmental goals should take a back seat until the economy improves ... That's short-sighted thinking. Tough economic times mean we need more solar, more green jobs."
Barring a worldwide depression that lasts for a very long time, oil prices will eventually resume their upward climb, although perhaps not quite at the same pace as we have recently witnessed, given what may be a chastened attitude toward speculation on the part of Wall Street for years to come.
For peak oil doom and gloomers the events of the last few months should be instructive. It has long been a tenet of faith that peak oil will wreak apocalyptic economic havoc: Higher and higher oil prices will simply be unbearable -- for industry, agriculture and consumers alike. But if the last few months are any guide, one of the first casualties of an economic downturn will be high oil prices, which will have the immediate effect of reducing the peak oil economic challenge, at least temporarily. If, in the meantime, we keep our eye on the ball, as Schwarzenegger recommends, the path ahead may be bumpy, but it doesn't necessarily have to be catastrophic.