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A BARREL of oil could be bought for $47.36 in after-hours trading at the New York Mercantile Exchange on Monday December 1st. The price of oil is now at its lowest level in over three years and some $100 cheaper per barrel than at its peak in July. The latest drop came after members of OPEC, who had gathered for an emergency meeting in Cairo at the weekend, failed to agree to cut output quotas, despite tumbling demand. Many analysts expect the oil price to drop further.

Many will cheer the news. Governments that were struggling to deal with inflation earlier in the year are enjoying some relief. The world's poorest, who spend as much as three-quarters of their income on getting enough to eat, were especially vulnerable to rising energy costs that helped to push up the price of food. Food riots erupted from Kolkata to Cameroon. With oil prices falling, and governments now more concerned about deflation than rising prices, those setting monetary policy have had no hesitation in cutting interest rates dramatically.

But not everything about a low oil price is a cause for cheer—nor is the dramatic volatility in the price a boon for consumers or producers. Most worrying is that the rapid recent decline is a symptom of a sharply worsening world economy: demand is dropping as economic activity stagnates, or slows, everywhere. More grim news about America's economy sent the Dow Jones Industrial Average down by 7.7% on Monday with Japanese markets following suit.

Environmentalists are not happy either. The recent period of high prices curbed appetites for oil and other forms of energy that result in emissions of carbon dioxide into the atmosphere. Although some have argued that demand for petrol is inelastic (in the short term drivers supposedly find it difficult to change their behaviour, or improve the fuel efficiency of their vehicles), anecdotal evidence and recent research suggest that responses to high prices were quick and significant.

A drop in sales of fuel-guzzling SUVs in America and increased use of public transport over the past year have been widely noted. And as petrol prices rose, people were more likely to scrap old cars, to buy more fuel-efficient models and to drive less. The result was lower consumption of oil and greater fuel efficiency of the fleet. Elsewhere it helped that many governments which had kept prices at the pump low through subsidies, reduced these. As a result more drivers were faced with paying closer to the true costs of their petrol use. But lower oil prices may reverse some of these trends.

Those concerned about energy security have reason to worry, too. Despite plans to increase the use of renewable energy and nuclear power—in the rich world, at least—oil will continue to represent a large share of energy needs, especially for transport. The long-term supply depends on continued investments in oil production, which is discouraged by low or volatile prices. Saudi Arabia's oil minister claims that $75 a barrel is needed to encourage new oil production to prevent a possible shortage in the future—although he is referring to expensive options such as exploiting tar sands in Canada, rather than tapping Saudi Arabia's own much cheaper fields. The International Energy Agency, a rich-country energy watchdog, estimates that fresh sources of oil that could provide the equivalent to six times the current Saudi output will have to be found to meet expected demand in 2030. If prices are low, this is less likely to happen, making a painful shortage more likely later on.

The price of oil would ideally reflect not only its demand and supply but take into account the damage that its use inflicts on the environment. But when oil is cheap, the hard decisions about investing in alternatives, inventing more energy-efficient plants and machinery, or changing consumer behaviour, all of which would help the world can wean itself off oil, become that much easier to postpone.