Thomas Donlan‘s latest editorial commentary in Barron’s delves into the impact of falling oil prices.

Energy prices around the world are in the tank again. The price of oil sank below $50 a barrel last week, continuing a collapse that started six months ago, when it was about $115 a barrel.

The recent decline has been described as astonishing, but only by people who have forgotten the $145 peak in mid-2008 and the trough of $32 a barrel near the end of that year. …

… The history of fossil-fuel development shows the same pattern over and over again, yet producers and consumers are always surprised by the sudden changes. It’s as if the hand of the market really were invisible.

Every time, the pattern is there for all who wish to see it: High prices for raw energy prompt the discovery of new territories and new production technologies. Then much new oil and gas can be produced, so every boom is followed by a bust, followed by another boom, and so on.

It doesn’t matter if the new supplies are added with heavy investment. It doesn’t matter if the investment funds were borrowed. It doesn’t matter if the oil must be sold at a loss. Once the investments have become wells, those costs are sunk. The owners of the new wells have to produce for any price they can get that’s better for them than the cost of liquidation.

Although some people who root for an energy disaster were predicting that oil would hit $300 per barrel in 2013, most people who have lived through more than one energy cycle knew there would be a bust. They just didn’t expect this one to arrive so soon. And now most people understand that there will be a shakeout, an investment bust, and higher consumption of cheap energy supplies, which will produce higher prices, sooner or later. …

… The most satisfying result of collapsing energy prices will be the economic growth that takes place because cheapening energy is like cutting taxes. It encourages consumption of everything and production of everything that uses energy. The second-most satisfying result will be the damage done to OPEC and all the oil-controlling dictators, sheiks, and presidents for life—and to their foreign bank accounts. The third most-satisfying result will be the embarrassment of the “running on empty” crowd and the nullification of their theories about imminent “peak oil.”