Higher oil prices aren’t leading to higher clean energy investments… sadly, it’s quite the opposite

There’s been a lot of investment and deployment in renewable energy technologies for power generation and for displacing petroleum products, but as far as we’ve come over such a short time, and as much as triple-digit oil prices are helping to accelerate the transition, the disturbing fact is that higher-priced oil is leading to dramatically more investment in dirtier, harder to access and riskier to extract heavy oil. So while we may be experiencing the beginnings of “peak” conventional oil we’re also seeing the word “conventional” being refined to include heavier crude, starting with the oil sands and now moving toward oil shale and heavy oil trapped in aging oil fields of the Middle East. My Clean Break column takes a closer look at this issue and comes to the conclusion that higher fossil fuel prices alone won’t wean us off fossil fuels, it will only make us go for deeper, heavier and more remote resources in an effort to feed our petro addiction. The answer is to put a meaningful price on carbon, impose stricter environmental regulations and eliminate unnecessary incentives for the oil industry. Sadly, we’re heading in the wrong direction and there’s no sign in Canada or the United States of the political will, or public pressure, required to shift course. What we’ve seen so far is window dressing.

George Monbiot raised this issue in one of his recent columns. He cited the fact that Fatih Birol, chief economist of the International Energy Agency, revealed in late April that crude oil production peaked in 2006. Yet the global economy didn’t collapse as predicted. Why not? “The reason, as Birol went on to explain, is that natural gas liquids and tar sands are already filling the gap,” Monbiot wrote. “Not only does the economy appear to be more resistant to resource shocks than we assumed, but the result of those shocks is an increase, not a decline, in environmental destruction.” The problem, Monbiot continued, isn’t that we have too little fossil fuel but too much. “As oil declines, economies will switch to tar sands, shale gas and coal; as accessible coal declines they’ll switch to ultra-deep reserves (using underground gasification to exploit them) and methane clathrates. The same probably applies to almost all minerals: we will find them, but exploiting them will mean trashing an ever greater proportion of the world’s surface.”

We’re letting it happen. Until we stop letting it happen, things will continue as they are, despite talk of peak oil and despite rising oil and commodity prices.

6 thoughts on “Higher oil prices aren’t leading to higher clean energy investments… sadly, it’s quite the opposite”

  1. Unfortunately, too many people have little to no clue what their investment dollars are up to. To be honest, how many armchair environmentalists are likely to also have holdings in oil sands operators in their RRSPs? I’m sure more than a few. With everything in life so specialized and compartmentalized, people- even fairly well informed people- struggle to connect the dots and the consequences of their actions. People focus on moving numbers on a screen, and have moved way beyond thinking about the actual real-world consequences of those numbers.

    If I was Prime Minister, I would make every oil sands investor live on the shores of a tailing pond. Unfortunately, Mr. Harper is Prime Minister, which means the frustrating “environment vs. economy” false dichotomy is going to continue dominating public discourse for at least four years. I’d love to meet this “economy”, because apparently it doesn’t rely on its surroundings and natural resources like we do. What an amazing construct!

  2. It would appear counter intuitive that if oil prices continue to rise there should be more investment into renewables. Unfortunately, I think the main reason that this is not happening is that it is still difficult to access credit. Most renewable projects have large up front capital costs and require lenders to take a long term view. Consequently, we need lenders to really understand the benefits of renewables, to take a long term view and get credit flowing again. Credit should not be given out in the reckless and unsustainable way that it was a few years back, but in a more thoughtful and sustainable way. Good renewable projects should be the recipients of such credit.

  3. This (hopefully) is just the short term response- let’s face it, we aren’t shedding our ICE vechicles any time soon, sadly- so investing in Oil, given the huge profits of late for Oil companies, is probably very bullish right now- and if all you are thinking about is short-term profit, not a bad investment.

    All we can hope for is the right combination of innovation, price points for Oil vs EVs/Renewables, and conscientious consumer choice to make those investments in Oil look bad- now that would be the ultimate response;-)

  4. I heard s.th. very similar. A consortium of german companies are trying to realize extraction methods for oil from oil sands, which was not too attractive up to today. It´s quite crazy to stick to an energy source which is already obviously running low!

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