Impact of cheaper oil on economic system and climate change: A SWOT analysis

The drop in crude oil price by nearly half since June 2014 has created new opportunities as well as challenges. This study employs the SWOT method to analyze the impact of cheaper oil on the global economic system and carbon emissions, exploring the climatic opportunities and identifying the challenges of lower oil prices. In addition, it contends that falling oil prices boost economic growth, but produce more carbon pollutants, thereby accelerating global warming. However, cheaper oil has provided a window of opportunity to remove fossil fuel subsidies, a major development that years of climate shaming has failed to achieve. Furthermore, we argue that social factors are a critical, often overlooked threat for the removal of fossil fuel subsidies. With declining oil prices exerting downward pressure on gas and coal, the removal of subsidies and carbon tax can be introduced without raising the energy prices. Four policy recommendations are proposed for the removal of fossil fuel subsidies to limit global warming as well as to meet the challenge and opportunity of cheaper oil. Removal of fossil fuel subsidies should be quickly implemented because this window of opportunity of cheaper oil will not last forever.