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With oil prices low, why go green?

Posted by Jason Ramsdale on 13 November 2015 at 11:55 am

With oil prices low, why go green?

Oil prices have hovered between $50 and $70 a barrel for the past year, and have fallen a further 10% in the last week alone.  The Financial Times has reported that it expects oil markets are likely to stay oversupplied until 2020.[1,2] These decreased prices seem to partially de-incentivise the transition to green energy. Homeowners may initially think that these falling fossil fuel prices mean that it’s time to buy a brand new gas guzzling car and put plans of investing in green technology on the back burner. However, more patient and long term thinkers might come to the conclusion that now is the time to make the shift towards renewable energy.

At first glance today’s energy prices and the changes to FiTs (Feed-in Tariffs) payments suggest a longer pay-off time and reduced financial benefit. However, the sudden drop in fossil fuel prices does not correspond with current production costs.[3] Fossil fuel companies are being forced to cut investment in new technology and the search for new reserves.[4] This will lead to greater uncertainty in the future and uncertainty is expensive.  If you are reliant on fossil fuels you can’t avoid the sudden price swings that will come with the decline of fossil fuels.

Green energy, such as solar PV panels (Photovoltaic), offers certainty. Choosing to install solar panels now can help you forecast your energy costs over the coming decades. Generating your own electricity will help reduce the impact of fluctuations in the price of fossil fuels on your household budget.

In 1973 oil prices quadrupled in a matter of months as a result of a trade embargo. The consequences of the 1973 oil shock were far reaching, from stock market collapse to high inflation and unemployment. Switching to green energy and improved self-sufficiency can provide a certain peace of mind. You’ll have limited your exposure to fossil fuel and electricity price spikes.

If you adopt this mind-set you won’t be alone, as Saudi Arabia’s Oil Minister Ali Al-Naimi announced back in May 2015 that they had embarked on a programme to develop solar energy.”[5] This move towards developing alternative sources of energy is shared by Oil giants Shell and BP. [6,7] If we can see the big players in fossil fuels moving toward renewable energy, perhaps we should consider it too?

The long-term trend of a move towards renewable energy remains as clear as ever and the recent ups and downs of the fossil fuel industry should be taken as a warning sign of things to come. Recent investments have made green energy more reliable and cheaper to install than ever before. If you want security, go green.

Do you think now is the time to go renewable?

Do you value the greater stability and a piece of mind that solar offers?

We’d love to hear your comments below.

Sources:

[1] Fortune [2] Financial Times [3] Forbes [4] Bloomsberg [5] Bloomsberg [6] Shell [7] BP

Image: Pictures of Money

See also: Is a more market sensitive Feed-in Tariff possible? and When will the level playing field be ready for renewables to compete on?

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