Will the Falling Cost of Oil Affect the Renewable Industry?

As the price of oil continues to plummet (as discussed in: Why Are Oil Prices Dropping?), experts are warning that it could have a negative impact on the global transition to renewable energy. English businessman, investor and entrepreneur Richard Branson is one of the big names behind the claims, expressing his concern that Saudi Arabia is encouraging the collapse of oil prices in an attempt to weaken the switch to clean energy.

“They have done it before and it hurt. They don’t just want to damage the US fracking industry, but also the clean energy business. The collapse of oil prices is going to make it much more difficult for clean energy,” he explains.

Falling oil prices challenge the rise of renewables

Falling oil prices have had a worldwide impact and as they continue to remain at rock bottom prices Branson maintains that ‘governments are going to have to think hard how to adapt to low oil prices.’

The idea is that if oil prices fall to a lower or equal rate as renewable energy consumers and businesses will be much less inclined to make the switch. “Before the oil price collapsed, solar was actually cheaper [than oil]. If oil goes down to $30-$40 a barrel, then it will make it much harder for clean energy,” says Branson.

According to the self-made billionaire 2015 is the ideal time for governments to take action and introduce carbon taxes on fossil fuels. The levy would essentially be written off by a cheaper oil prices which would minimise opposition and help slash carbon emissions.  

A billionaire with an eco-friendly conscience

So does Branson have a right to be making these claims. Given Virgin airlines’ latest investment in £300 million worth of eco-friendly fuel, solar and clean energy developments the answer is yes! Adding to his eco-friendly endeavours is the upcoming merge of the Rocky Mountain Institute (RMI) with his not-for-profit low-carbon business solutions organisation Carbon War Room. Both philanthropic institutions offer businesses and governments expert advice on how to cut carbon emissions and boost eco-friendly credentials. As expected, the newly merged company will do everything in its power to encourage governments to support renewable energies and resist the temptation of falling oil prices. 

“We are closer than ever before to transforming the world’s economy to a lower-carbon trajectory. We need to accelerate demand and financing for low-carbon solutions, and quickly,” said Lovins, founder of RMI.  

So could cheaper oil prices really damage the global switch to renewable energies? Richard Branson says yes and his concerns are backed by an army of politicians, environmental advisors and economic experts. Whether or not the renewable energy industry begins to experience a lull in the next few months and years will be the true indicator of whether or not Saudi Arabia’s tactics have worked… 

What Next?

For further reading on this topic, take a look at the pros & cons of plummeting oil prices and whether this is a good time to buy stocks.