The recent jump in crude oil prices beyond $100 a barrel has prompted a major question: Will this current surge in the famously volatile oil market assist to accelerate the global transition away from fossil fuels and toward cleaner energy sources in order to combat climate change?
The answer is most likely no.
On the one hand, rising prices for gasoline, diesel, and other crude oil-based products, according to energy analysts, may encourage cost-conscious consumers to switch to electric vehicles sooner and increase investment in competing clean technologies such as hydrogen.
However, as fossil fuel companies hurry to cash in, these high prices will spur increased drilling of oil and gas around the world, laying the seeds for the boom to turn into a bust. This will restore oil’s abundance and affordability.
This is a pattern that the world has seen before in the oil age, and one that has historically punished clean energy investors.
Some of the arguments on both sides of the discussion are as follows:
When the price of fossil fuels rises, customers become more interested in electric vehicles and renewable energy alternatives, not only for environmental reasons but also to save money. It’s a scenario that came to fruition after oil prices nearly broke $150 per barrel in 2008, boosting sales of electric vehicles.
Electric car sales are increasing globally, primarily in China and Europe, and to a lesser extent in the United States.
Rising oil prices, according to the Paris-based International Energy Agency, could hasten the electrification of the transportation sector while simultaneously hastening the shift to renewable energy sources such as solar and wind, whose costs have decreased in recent years.
However, according to the IEA, sales of gas-guzzling sports utility vehicles are on course to reach 45 percent of worldwide car sales in 2021, a year of gradually rising oil prices, setting a new high in both volume and market share.
SUV demand negated the efficiency improvements of EVs, raising doubts about how much high oil costs are influencing the move.
Analysts also point out that cars and trucks only consume approximately 20-25 percent of the world’s petroleum, while other industries like manufacturing, marine transportation, aviation, and agriculture have made relatively little progress in terms of fuel economy.
Claudio Galimberti, an analyst at Oslo-based consultancy Rystad Energy, said, “We haven’t seen any sign of energy shift yet” in such industries.
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