First off there is no ignoring the fact that energy prices have continued to climb, and the best indicator for this has been record high oil prices which have showed no sign of letting up. Indeed OPEC at this point seems to be quiet happy to establish a new price floor at $80 a barrel compared to the $70 a barrel which many analysts had feared would become the norm last year. Adding to the mix no doubt are the continued unrests and unfavorable developments in key petroleum producing states. The usual list of suspects has grown larger with even more countries being added to the list of petro-cracies. Myanmar is a great example , although home to a rather small amount of oil and gas when seen on the global scale, it does provide a good share of petroleum products and energy to Asian powerhouse economies such as Singapore, India, Thailand and most of all China. For a nation like China which is attempting to diversify and hedge its risk and supply of oil across several nations and continents an disruption, no matter how small is a big set back. This owning to the fact that China’s growth is so rapid that energy demand growth can hardly be satisfied. High oil prices however are not translating directly at the pump or energy bills in some places. Countries in the European Economics Union who are either using the Euro, Pound or other pegged currencies currently do not feel the brunt of burden as the weak dollar is offsetting the oil price hikes. Adding to this is the fact that most of these countries do not have as large of a share of electricity being generated from what was previously cheap oil, save for exceptions such as Italy. In the end though higher carbon energy prices be it for gas, oil or coal will mean that renewables will become more and more attractive from a Kwh perspective. A continued climb sustained with no sight of cheap oil coming back onto the market should also alleviate the fears of investors of another bust in the market for renewable investments. As the large integrated energy multinational giants find their projects more and more difficult to conduct , they may also start to look at whether renewable domestic projects which require little in the way of risk and complex negotiations make more sense with more predictable returns.
Analysts have already stated that they believe that surplus inventories will build if there is another winter like last and that production will gradually make its way to record breaking levels. OPEC however may choose to keep this new price floor, there is also concern in these countries that by both pegging to the US Dollar and their main export being priced and sold on international markets in this currency could hurt them. This giving even further weight to the renewable energy argument.
Oil prices are also much more volatile then gas prices, the later of which are negotiated with fixed prices or fixed ranges for periods of 10-15 years in comparison to a spot market. Gas infrastructure as well as production and distribution is becoming more monopolistic with more national champions being created, a fact which does not sit well with many consumers or local consumers in Europe for example. This again could spurn a pickup in investments for solar, wind and biomass installations. Lastly there is no decoupling or hedging which could alter the demand picture, as globalization charges ahead with more and more citizens gaining access to energy prices of this finite product will continue to climb. Interestingly enough both the rich and the poor nations could be the first to generate higher demand for renewable albeit for completely different reasons.
