this post was submitted on 16 Oct 2024
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Fossil fuel has actually pretty high fixed production costs. The best example was Texan oil going negative during covid. So with a fast deployment of renewables replacing fossil fuels, we will see periods of fossil fuels being cheap, as renewables replaced enough of them to see oversupply. However low prices also force production to be cut, partly by companies going bankrupt. Once enough has been cut prices are going up again.
Right now we see a number of OPEC+ countries breaking production limits. Namely Russia, Iraq and Kazakhstan. The Saudis see Iran heading towards a war with Israel and the Saudis want to hurt Iran. So the Saudis threaten increased oil production to hurt Iran's economy. That would also hurt fracking producers in the US, which would also benefit the Saudis.