Energy politics & economics update

My last post suggested oil prices would rebound, but obviously I underestimated how determined certain countries are to use the oil price as a weapon. There is all kinds of speculation, including the suggestion that the once powerful OPEC group wants to hurt the USA natural gas industry and the Russians at the same time. They have loads of cash, so they don’t care how long it takes to inflict the damage they are seeking. It’s all a little complicated and in a few decades will be irrelevant.

The good news is that the growth in investment in our renewables future APPEARS to continue unabated by the availability of cheap oil and gas. According to Bloomberg total clean energy investment jumped 16%  in 2014, to $310bn (£205bn). China led the trend with growth of 32%. Of course most of this was before the oil price collapse; however it also took place during a period when a lot of government subsidies for renewables disappeared, or were reduced. In addition, China and the US reached an agreement this past November that says China will increase its non-fossil fuel energy consumption to 20% within 15 years; and the USA will reduce emissions by 26-28% below its 2005 level by 2025. Republicans in the USA will try to prevent this in the short term, but unfortunately for them, China and the rest of the world will ignore them, creating a global competitive imperative within 10 years or so.

I’m trying to paint a rosy picture here but the realist in the dark corner of my brain is screaming out that we should expect some difficulty for clean tech investment during 2015 and perhaps 2016.  Governments will continue to move into renewables for centralized power. I think distributed solar will continue to grow in places where it is already growing quickly. But inroads into new market regions will be delayed, while cheap natural gas remains abundant. Everything is exaggerated. Low oil prices will hurt but not cripple the fracking business. On the other hand the fracking business probably is making more of its productivity gains than it should.

In the long run coal and uranium-based nuclear are more or less certain to expire, but in both cases it will take a long long time to reach their end. Oil and gas will likely live on forever, but their global dominance will dissipate within a few decades. I still believe that the march toward a green future is unstoppable, but it will march more quickly when oil and gas are expensive again.


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