2012-07-02

Co.Exist

What Happens To Clean Technology Innovation If Oil Prices Drop?

Cheaper gas might be nice for your wallet in the short term, but if oil prices plummet (and it looks like they might) what will that do to the quest for renewable energy?

Peak oil, the point where world oil production reaches an apex and then begins an inexorable decline, was a cult concept until the end of the last decade, when concern about a downward spiral in oil supplies--heightened by high oil prices--reached a fever pitch and the idea that we might run out of oil reached the mainstream. In many ways, this was a good thing; it created a space for alternative energy innovation to grow.

But surprisingly, a new report (PDF) from Leonard Maugeri, a former oil executive and current fellow at Harvard’s Belfer Center for Science and International Affairs, warns: "oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices." That dip in oil prices would mean cheaper gas, certainly, but it could put a serious damper on how far we’ve come in the search for non-fossil-fuel-based energy solutions.

It’s all thanks to technology and investment in exploration by oil companies, who are increasingly using "unconventional" oil extraction techniques in shale oil fields, tight oil fields (oil fields that only make sense to drill when advanced techniques like hydraulic fracturing and horizontal drilling are used), and tar sands.

In fact, says Maugeri, these techniques might allow the U.S. to be the second biggest oil producer after Saudi Arabia by 2020. Good news for our oil-powered economy? Maybe. But the environmental risks are disturbing. Maugeri admits that hydraulic fracturing, or "fracking," can cause water and land contamination, though he plays down those risks. And we’re already seeing the potential ramifications of tar sands projects in Canada.

Regardless of whether or not peak oil will soon be upon us, one thing is clear: A glut in oil will be dangerous for energy innovation. And even if we have enough oil to last us until the end of time (we don’t), the climate-related ramifications of continuing to use oil at our current pace will catch up to us in the near future.

This isn’t like the 1970s, where oil shocks got Americans seriously thinking about alternative energy. When that crisis ended and the country was once again awash in cheap oil after, energy innovation ground to a halt, and nobody thought twice. But if we find ourselves in a situation where oil production capacity rises by 17.6 million barrels daily until 2020 (as Maugeri predicts), chances are that energy innovation will once again slow--and unlike in the 1970s, we don’t have a relatively stable climate that allows us to delay on implementing these technologies.

As MIT Technology Review explains, there is no real reason why the solar industry should be impacted by oil prices. But some people may not know that oil isn’t used much to generate electricity, lessening their enthusiasm for alternative technologies.

Electric vehicle rollouts would almost definitely be directly hurt by ultra-cheap oil prices; who cares about spending tens of thousands on unfamiliar car technology when you can rely on gas-powered cars that are cheap to fill up? Some might argue that electric cars aren’t actually emissions-free since they plug into electricity sources like coal, but increasing the amount of renewable energy on the grid (something that could be threatened by an oil-price collapse) would alleviate the problem.

A dip in oil prices might be nice in the short term, but there will probably be major consequences.

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3 Comments

  • saidas

    Extracting oil from tar sands and shale and from deep sea is a far more expensive process than the dwindling oil we currently get. The US hasn't built a refinery since the '70s. There is also the matter of the enormous number of drivers being added with a 7 billion population and a rapidly increasing middle class in China, India, Brazil, and Middle East. Prices will only increase.

  • Apexerman

    Unfortunately, the writer's concerns are legitimate.  Less expensive oil will hamper adoption to alternative sources of energy.  The appetite for cheap oil is strong in developing countries and the momentum will be difficult to slow.  My sense is that more money should be spent on basic research to improve the viability of alternative sources such as solar panel development and battery technology.  That will be a tall order.  Scientists are already pushing the limits of physics while the oil industry pushes the limits of engineering.  Engineering has a clearer end-goal.

    I wish I could put a more positive spin on the assessment, but the reality of energy usage and costs are formidable.  A true scientific breakthrough is necessary to change the game.