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?

What Happens To Clean Technology Innovation If Oil Prices Drop?
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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.

About the author

Ariel Schwartz is a Senior Editor at Co.Exist. She has contributed to SF Weekly, Popular Science, Inhabitat, Greenbiz, NBC Bay Area, GOOD Magazine and more.