Cheaper oil, that can’t be good for the renewable / low carbon energy sector can it? Whilst we want this to be a moral issue, still a lot of our decisions around our green choices are based on cost.
I have just read an interesting article from a global Environmental fund manager who highlights that the cost of oil has little bearing on what is driving the move towards cleaner energy.
Making sparks!
Firstly, oil is not typically used to generate electricity so it is of little significance to many power producers.
Also in many parts of the world, coal and gas is so much more expensive than renewables as to be uncompetitive even with this latest price reduction.
Electric Vehicles
Perhaps in sectors such as Transport, which is influenced heavily by the price of Crude, it would be assumed that this may dampen the enthusiasm to move to electric vehicles (EV’s)
Tax!
What we conveniently forget in Europe is that fuel pump prices are made up of so much tax (typically 60%) that the effect of the change in the cost of the oil is dampened.
Even in countries like China which does not have the same fiscal hit at the pump, there is actually a floor on the price of fuel, and the current price has gone below that. Sadly, changes in price do have an impact in the US, but currently the US EV market is tiny, so they would have limited effect on global sales.
Total Cost:
Do we look at the total cost of a car when we buy it, or do we look at the purchase cost only? The evidence suggests we only look at the latter, and not just in the luxury end, but also in mass market, so a comparison of ongoing costs doesn’t seem to be a consideration for most car purchasers.
The cost of EVs are starting to be comparable with their internal combustion engine counterparts for this very reason.
It is a little different if you are buying a fleet of buses or delivery trucks where total cost is, of course, considered, however, companies want to be seen to be ‘being green’ and that consideration may well ‘trump’ cost. Amazon and TFL are 2 companies who plan to electrify their fleets.
Challenges for EVs
EVs are not a one way bet, we still have different technologies and they won’t all be winners, and we also have inadequate charging structures in most countries. Sales in cars may also be affected by Covid 19
The drop in the oil price is not one of them though.
Notwithstanding that, the prospect is optimistic: Regulation will favour EVs, there is mounting concern over climate change and there is more choice of EVs that ever before.