Why Cheap Oil Isn’t Bad For The Environment
It stood to reason that collapsing prices for oil would make clean energy relatively more expensive. That would dampen the public’s craving to install solar panels and build wind turbines.
Well, let’s try to reason again. A lot of opposing forces are shaking the old assumptions. In the jaws of bargain oil, the U.S. Department of Energy expects Americans to increase their use of renewable power this year by almost 10 percent. Why is this time different?
Consider solar power. Over the past 18 months, the price of oil has fallen by 75 percent, yet the installation of solar panels proceeds apace. The advocacy group Solar Foundation reports that jobs in solar energy increased last year by more than 20 percent. Most of them were for installers.
As for wind power, Denmark-based Vestas, one of the big three wind-turbine companies, says that business continues to boom in North America, Asia, Africa and Latin America. Its stock price doubled last year.
What’s going on? For starters, while the price of oil has fallen, so have the costs of green energy technologies. For another, strangling air pollution in China and India has fed a desire for clean energy greater than the urge to find the cheapest source.
And international alarm over carbon’s role in global warming has taken root in concrete ways. It appears that vows to cut fossil-fuel use at the Paris climate-change summit are being taken seriously.
In this country, Congress recently extended tax credits for new wind and solar projects. President Obama’s Clean Power Plan, meanwhile, is requiring states to cut power-plant emissions.
Sharply lower oil and gas prices have translated into enormous savings for consumers. Some developing countries have used their newfound cash to cut subsidies for gasoline. Countries dependent on imported oil are using the savings to invest in wind power, according to Vestas.
Drops in oil prices act like tax cuts, and American consumers may be spending some of their bounty on SUVs and trucks. That’s not great environmental news. On the other hand, SUVs and trucks are now so much more fuel-efficient than in the past.
Within the fossil-fuel world, a sharp drop in oil prices has rearranged the economics with environmental benefits. As The Economist magazine explained, “Cheap oil has a green lining, as it drags down the global prices of natural gas, which crowds out coal, a dirtier fuel.”
Another green lining is that it makes drilling in hard-to-reach places, such as the Arctic, less economically feasible. This offered good timing for Obama’s proposal to extend “wilderness” designation to millions of the acres in the Arctic National Wildlife Refuge. Drilling and mining are off-limits in wilderness-designated areas. ANWR has long been a battleground between environmentalists and oil companies.
Some economists worry that the oil-price “tax cut” isn’t doing much for the American economy because consumers seem to mostly be saving the money instead of spending. Cheer up. Saving should be regarded as deferred spending, and in any case, it’s about time Americans amassed an economic cushion.
Of course, the drop in energy prices has hurt oil-and-gas-producing parts of this country, Alaska in particular. Happily, the economies of oil-producing Texas and North Dakota have become considerably diversified. Energy is not the only game. Certainly, oil and gas are not. Texas has become America’s biggest producer of wind-powered electricity.
Renewable energy is not the environmental plaything mocked years ago by the drilling interests and their politicians. Two months ago, in the midst of an oil-price tumble, Goldman Sachs said it was quadrupling its bet in alternative energy to $150 billion. Hard numbers have clearly taken over the debate, and clean energy is winning.
Follow Froma Harrop on Twitter @FromaHarrop. She can be reached at firstname.lastname@example.org.
Photo: A pump jack stands idle in Dewitt County, Texas January 13, 2016. REUTERS/Anna Driver