Yes… I’ve decided that this is a word…. deal with it. So this an interesting time in the energy market. Over the last year…. the world has come to the realization that we are not running out of oil… “gasp”… in fact for the time being we have quite the glut of oil. There is oil coming out of our booties…. And since supply is such more intense than demand prices have plummeted over the past year.
As you can see, after trading at a fairly constant level from 2011 to 2014, the price of WTI ( a form of United States traded oil) plummeted due to the recently realized glut of oil and OPEC’s announcement from Saudi Arabia that OPEC would not cut oil production in order to stabilize prices and ever since, the oil markets have been the definition of turbulent. But what does this mean for the environment… well it means quite a bit.
While the need for sustainable clean energy is driven in some parts due to the desire to protect our environment. Another, more capitalistically focused, driver for finding sustainable renewable energy is the consideration that we have a limited amount of oil and that oil is overally expensive… both of which is not as big of a concern right now… because as supply increase the laws of supply and demand tell us that price has to fall as well.
With historically low oil prices, there is a logical concern in regards to the short term future of renewables.
“But Adam Sieminski, who heads the Energy Information Administration, said ‘oil was not in head-on competition with renewables when it came to electricity generation – and that government policies would help shield the clean energy industries.'”
This is not to say that there will be no demand for renewable energy as “’A lot of the demand that is coming for wind and solar additions in the US is supported through tax incentives and state energy programmes that require a certain percentage of electricity to come from renewables,’ Adam Sieminski told a breakfast hosted by the Christian Science Monitor.”
For 2014, the EIA expects “US greenhouse gas emissions to creep up in 2014″ – contrary to the intent of Barack Obama efforts protect our environment and prevent climate change.
Ford F-150 vs. Prius
As demonstrated by the above chart, lower oil prices are without a doubt impacting car sales.
With oil prices significantly lower this year, there is also the belief that customers have much less of an incentive to purchase more expensive electric cars over gas guzzling trucks, Subaru, and even gas powered compact cars. Lower gas prices in general have a bullish effect on the overall car market, but does this carry over into the electric car market?
According to Capital Economics economist Paul Diggles, “Lower gasoline prices should give a particularly big boost to sales of less fuel-efficient light trucks, which already slightly exceed sales of cars,” he said in a recent note. “Not only are light trucks less fuel-efficient, they are, on average, more expensive and more profitable for manufacturers too.”
Many industry analysts, such as Paul Diggles, are concern that the demand for electric cars will continue to fall along with the price of oil however, electric car expert Robert Llewellyn does not share this conviction. When writing on his blog, he shared his belief that the oil price decline is not likely to impact the electric car market. “As anyone with two brain cells is aware, people don’t buy electric cars just because petrol is expensive or cheap,” he wrote. “There are hundreds of reasons, the main one being that the technology is more interesting, impressive, reliable and it is possible to make your own fuel.
The fall in oil prices has had another less published impact on the market as a whole. Plastic, often derived from oil, used to be profitable to recycle. But now, according to Chris Collier, the commercial director of a recycler of bottles, pipes and sundry bits of plastic, “Many in the recycling industry are hanging by the skin of their teeth…Everybody is desperately chasing for money to stay alive.” The ramifications are serious. Many cities in the U.S. pick up detergent bottles, milk jugs and other types of household plastic and sell the scrap. According to the Wall Street Journal “These municipalities typically earned cash—as much as $10 a ton in parts of New Jersey(for example)—for selling recyclable materials under contracts that tie the sales price to commodities prices, with a minimum. In recent months, some expiring contracts have been replaced with new contracts that set no such floor. That raises the possibility for some municipalities that a moneymaker could turn into a loser.”