Falling Crude Prices – A Threat To Clean Energy Transition

In Renewable Energy, Clean Facts, Clean Fund, Clean Truth, News, Opinions

The historic fall in crude prices is putting a downward pressure on the appetite for a cleaner energy transition and could hurt demand for electric vehicles and dim the appeal of energy efficiency measures.

Cheap oil is likely to make electric vehicles less attractive to consumers, at least in the short term. The global electric vehicle market had already suffered a slowdown last year because of weaker demand in China and the Americas. It is a picture that the spread of coronavirus risks exacerbating as the global economy stumbles.

“The vehicle market is already shrinking and is now hit by potential supply chain shortages and lower consumer confidence,” the research group Bloomberg NEF noted in a recent report. “We now expect EV sales in China to take a hit in 2020 . . . This could still fall further as the full impact of the coronavirus becomes clear.”

Total material requirement for the global energy transition to 2050

Increasing the threat to the energy transition is that low energy prices often reduce the economic incentives to conserve it and find ways of using it more efficiently.

“Low energy prices will make the economics of energy saving less attractive due to cheap oil and gas, and this is definitely not be good news for clean energy transition.”

Even before the economic shock of coronavirus, investment in clean energy peaked in 2017 and fell slightly in 2018 and the first half of 2019.

Another factor that could shape the outlook for clean energy is that oil and gas companies find it harder to fund the investments in renewable energy they had planned.

The current situation would be “a good test” of all the climate commitments that government and companies had been making recently. “Observers will be quick to notice if governments’ and companies’ emphasis on the transition dies down when market conditions become more challenging.”

Reference- Financial Times, Bloomberg NEF Report, OilPrice website

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