- The Washington Times - Tuesday, April 21, 2020

Climate warriors led by Rep. Alexandria Ocasio-Cortez chuckling over the collapse of oil prices are receiving a crash course in economics from analysts who point out that cheap gas is actually the enemy of green energy.

Plunging demand driven by the coronavirus pandemic continued to roil the market Tuesday as the price of a barrel of oil to be delivered in June plunged 43% to $11.57, a day after the May price dropped into negative territory for the first time in history as supply outstripped storage capacity.

Meanwhile, the national price of gasoline fell for the eighth straight week to $1.77 per gallon, the lowest level since 2016, “and prices will continue to go down,” said GasBuddy petroleum analyst Patrick de Haan.

“What’s happening with oil markets is a reflection of what’s happening with the broader economy, and that’s not good for green energy,” said Alex Gilbert, fellow at the Payne Institute for Public Policy at the Colorado School of Mines.

He cited the travel restrictions that have slowed automobile traffic and tanked the airline and cruise industries, meaning that “there is no demand for oil.”

“In the short term, if we have very low oil prices, that will hurt the transition to electrical vehicles in the United States, but it will also hurt the broader, global clean energy transition, because oil is still used for non-transportation purposes in some countries, and it also influences liquefied natural gas prices,” Mr. Gilbert said. “So that will make the transition slower in some countries as well as in the United States.”

Ms. Ocasio-Cortez came under fire Monday for a now-deleted tweet in which she said “[y]ou absolutely love to see it,” referring to the oil collapse, but she was hardly alone.

“Since the oil industry is running out of places to store their unwanted product … perhaps we should just keep it in the ground. Forever,” tweeted 350.org founder Bill McKibben, which was retweeted by Swedish teen climate activist Greta Thunberg.

Even before Monday’s plunge, predictions were widespread that lower fossil-fuel prices, coupled with the economic downturn, would take the shine off ambitious green energy mandates and renewable projects.

“Goodbye renewable energy. Hello cheap oil,” said an April 3 op-ed in the [U.K.] Telegraph, arguing that the “dual crises of oil and Covid-19 have thrown the future of renewables into doubt.”

<blockquote class=”twitter-tweet”><p lang=”en” dir=”ltr”>Goodbye renewable energy. Hello cheap oil <a href=”https://t.co/9ZzVCDl8JS”>https://t.co/9ZzVCDl8JS</a></p>&mdash; GWPF (@thegwpfcom) <a href=”https://twitter.com/thegwpfcom/status/1252548506327416833?ref_src=twsrc%5Etfw”>April 21, 2020</a></blockquote> <script async src=”https://platform.twitter.com/widgets.js” charset=”utf-8”></script>

Economists warned that the oil industry’s loss isn’t green energy’s gain. For example, automobile sales have been hurt by the pandemic, but electric vehicles dealers have been hit hardest.

IHS Markit released projections Tuesday for a 22% decline this year in global auto sales, while an April 3 analysis by Wood Mackenzie foresaw a 43% plunge in worldwide electric-vehicle sales in 2020.

Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University, said that plunging gas prices have taken the shine off spending more for a pricey Tesla or other electric vehicle.

“Most consumers are going to make a calculation of, what’s my front-end cost of acquiring a vehicle, and what are the operating expenses?” Mr. Weinstein said. “And it would seem to me that for the next few years, the good old internal combustion engine is going to be the winner.”

The Competitive Enterprise Institute’s Myron Ebell noted that electric-vehicle manufacturers like Tesla and GM have lobbied to increase the number of vehicles that qualify for tax credits, which may be their best hope in the current economic climate.

“I don’t see how anyone’s going to sell electric vehicles unless Congress decides to expand the subsidy,” Mr. Ebell said.

As for renewable-energy projects, it’s a mixed bag. On the one hand, teetering local economies are less likely to invest in a solar farm or wind turbines, especially given reduced energy demand, especially in oil-producing states such as Texas.

“A lot of local economies are really going to be suffering in Texas for years now, and they’re going to be less likely to buy solar or wind or do other things to adopt clean energy for their system,” Mr. Gilbert said.

On the other hand, borrowing money for major capital-intensive projects may be more attractive with near-zero interest rates, especially in states with renewable-energy mandates. Congress and state lawmakers also could drive green-oriented stimulus spending for the coronavirus recovery.

“The big open question is policy,” said Mr. Perkins. “We’ve also seen work at the state level to promote clean energy. Those initiatives, if they’re doubled-down upon, could really help grow things, but the collapse right now of the oil industry and the financial hardship there is not necessarily going to be a big boon for clean energy.”

The clean energy industry lost 106,000 jobs in March, “obliterating the job gains the entire sector had seen in 2019,” and the number that could swell to 500,000 “if no action is taken,” according to PVTech, citing an E2 analysis.

Environmentalists have pushed for the coronavirus stimulus to include billions to expand the green-energy power grid, a case that becomes difficult to justify economically with low natural gas prices driven by the shale revolution. Natural gas accounts for the lion’s share of electricity generation.

“If you look at the sale of solar panels, installation of windmills — everything’s hurting right now with the shutdown,” said Mr. Weinstein. “I know AOC is arguing, hey, let’s revive the U.S. economy by investing in renewable energy. On the other hand, natural gas is so cheap — and will remain cheap — that if you’re talking about adding additional capacity to the power grid, natural gas makes a lot more economic sense than wind or solar.”

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