Oil price fall: its not as great as it sounds

A low oil price sounds like a great thing. It means that our fuel bills will fall as will the cost of running our cars. Our world is so heavily oil reliant that a low oil price really does affect everything. In some ways it feels great. But with the fall in oil price comes a fall in the urgency and profitability of searching for renewable energy sources. We seem to forget the effect the burning of oil has on the environment and instead believe that we were only looking for alternatives due to the price of the sticky black stuff. Unfortunately, the environment doesn’t care whether the oil you are burning cost £1 per litre or £100.

The largest wind farm operator in the world, the Danish company Vestas, has seen a huge fall in its share price. Other renewable energy companies have seen similar share price falls. Investors are running scared as the threat of cheap oil looks set to continue into next year.

Renewable energy sources are not simply funded by private investors, they are also heavily reliant on government subsidy. But as a taxpayer, why are you going to want to help fund the development of these new energy sources when oil is cheap. You have enough to worry about with food bills, paying the rent or mortgage and generally living your life.

The problem is the environmental one. This is nothing to do with economics and investor whims about what industries are high yielding or exciting to be part of. The development of new energy sources is about the future of our world and all plant and animal species which live on it. As soon as we have a bit of news which helps us personally, we seem to lose sight of the bigger picture — even if it is likely to affect our own children directly.

So where does the problem lie?

Well, there are two problems. The first is our attitude and belief system. The world we live in has really only one belief system which is that of capitalist democracy and there is no longer any challenge to this. There is nothing wrong with this system, it has worked far better than many others though out history. However, we have begun to equate capitalism and democracy as one and the same thing.

How does this relate to the fall in oil price and the fall in renewable energy investment? It means that on an individual basis, we are beginning to lack the ability to separate our own personal benefits from the greater good. Our desire for democracy and the freedom it brings means we believe that we must follow the capitalist mentality. We think in the short term and there is little greater purpose to aim for. We are simply following the economic model in place and looking out for our own personal material gain in the short term.

Secondly, our economic model is two dimensional. Working on the basis of highly questionable assumptions about the behaviour of people and the need to maximise profit and production, economics has not developed to take account of new developments which have relatively recently become prominent such as environmental damage.

Ultimately, we have developed a system which cannot take account of the environment or the people who live within it. It has worked while we have had a relatively small problem with finite resources, but to continue using this model without significant development could be seen as potentially very concerning as we move into a new era in environmental degradation and population growth.

So back to renewable energy, what is to be done. Well, the last thing that should happen is a fall in the investment into the industry. The development of renewable energy and the more general move to environmentally friendly and sustainable lifestyles should not be intertwined with the market driven model we currently have because it does not take account of all the elements of this development. Looking at profit and loss is simply…well, too simple.

To account for these elements which are not monetary is difficult and we are not in a position to develop a whole new economic theory today! However, one thing is clear, just because the oil price falls, the world cannot simply go back to business as usual. We need to be able to think about more that short term money making. We need to plan for the future probably more than we have ever needed to before.

Thanks for reading!

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Originally published at shrinkthesupplychain.com on December 19, 2014.