Doom by low oil prices?

Oil prices continue their precipitous plunge into the abyss.

Unless, however, you believe economics is bogus (and most doomers do), you'd be inclined to think that this is a good thing.

I've heard various conspiracy theories that the collapse in prices is caused by various groups who want to stick it to various other groups.

One other possibility is this: Saudi et al, not only are not on the cusp of massive oil depletion at Ghawar etc but in fact see the writing on the wall. There is now a theoretical cap on oil prices. We can substitute transportation by fossil fuels to non-fossil fuels in a variety of use cases by a variety of methods. Everything from electric cars, trucks and trains to nuclear powered freighter ships. If we wanted to, we have the technical means to substitute away. So will we?

I happen to think that the situation we are in is this:
In a market based global economy (which more or less our little blue planet is, give or take a few definitions and basket-case states), generally the best priced items win. If oil prices remain high, the substitutes will chip away and chip away.

An electric car such as a volt (in which you do most of your driving using electricity) is basically a permanent stripping away (for at least the lifetime of the vehicle) of several barrels per unit of time of demand.

Now scale that up and imagine what it actually looks like for a large producer of oil: The oil price is set at the margin - the last few barrels of supply set the price for all the barrels. Right now demand is 96 some million barrels per day but supply is 98 million some barrels per day.

Now if we are to believe the more conservative economists, it isn't substitution that is causing this, it's a slowdown in China and Europe being in the doledrums that is causing a buyers market.

So why does Saudi not cut production?

Well you can believe the conspiracy theorists (e.g. they are trying to crush the Iranians/Venezuelans/Russians etc)

OR

Maybe the Saudis see the long term writing on the wall and they are trying to slow down the long term fall in price? i.e. to spell it out: Is Saudi scared of Tesla????

Now an interesting corrollary is this: I happen to love the idea of electric cars. But I don't want to pay $40-80K for one. The Tesla market shouldn't be much affected because, being a luxury market, it's price insensitive.

BUT.... the cheap end of the market (e.g. the Nissan Leafs and the Chevy Volts) ought to be a little more price sensitive. Will it be, or will they throw in the towel and let the Chinese eat their lunch when oil prices go back up in the next business cycle? Who knows, but interesting times.