Oil Shock Threatens to Take Wind Out of Sails for Renewables Shift
“The oil crash will definitely put downward pressure on the appetite for a cleaner energy transition,” Fatih Birol, head of the International Energy Agency, said of the historic fall in crude prices.
Analysts warned that the oil price shock could hurt demand for electric vehicles and dim the appeal of energy efficiency measures because the turmoil — allied to a slowing global economy — had a chilling effect on the most ambitious renewable plans.
Mr Birol said the 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.”
Cheap petrol is likely to make electric vehicles less attractive to consumers, at least in the short term.“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.”
Some analysts said that low oil prices could hasten a structural shift away from fossil fuels by making energy companies less attractive to investors. However, while renewable energy projects typically generated lower returns than oil and gas exploration, they also offered long-term price stability that could become more attractive in the current market, said Mark Lewis, head of climate change investment research at BNP Paribas Asset Management.
“Governments need to keep the eye on the ball, here the ball is climate change,” said Mr Birol. “These issues are big issues — coronavirus, market conditions — but these are temporary. Maybe in a few months, maybe longer, the market conditions will recover, but our climate challenge will still be there.”
Source from: FT