Between June 2014 and January 2015, the Brent crude price per barrel registered a sharp decline – to the extent of ~60%. This is the highest slump recorded in crude oil prices since the financial crisis of 2008. However, contrary to the popular notion, the plummeting prices should not be construed as the harbinger of yet another economic downturn. In fact, the downturn is a balancing act providing inflationary relief for oil importing countries, particularly economies such as India. Additionally, fair level prices of crude oil will rationalize the economies of alternate sources such as shale oil.
Renewable energy sources, such as wind power and solar energy, do not compete with the oil markets and hence are not impacted by their volatility. However, the instability does impact gas prices – a sector in direct competition to renewables. So, in a way, the current trend augurs well for renewable energy markets. Nevertheless, given their scalability, cost-competitiveness and ecological compatibility, renewable sources of electricity generation are gaining prominence rapidly, irrespective of the thrust. For instance, wind energy contributed 771 TW hours to the total electricity generation in 2014 as compared to 644 TW hours in 2013.
A country-wise assessment reveals that the renewables trend is catching up swiftly in developing and developed parts of the world alike. In Brazil and Australia for instance, onshore wind power is cheaper than new power plants that use fossil fuels. Europe is committed to a low carbon economy path and therefore, the carbon prices support the sector’s growth. In the US, wind power is competing with low shale gas prices and the government policies are encouraging investments in the sector. Emerging superpowers, India and China, are expected to back a major portion of the renewable energy capacity over the next two decades.
Both the factors – rationalized crude oil prices and accelerating investments in renewable sources of energy – have a significant role to play in the transition towards a low carbon economy. Together, they will contribute to global prosperity on the back of energy efficiency and long-term resource protection.