Oil Prices and Alternative Energy

This blog is based on the post Oil Prices and Alternative Energy.


Nordstream 2 gas pipeline The Nord Stream 2 Gas Pipeline

For the last three weeks the world has been riveted to the news coming out of Ukraine, and empathizing with the suffering of the people of that nation. What the long-term outcome of the attacks will be is at this point anyone’s guess. Events are moving so quickly that forecasting what may happen in even the next few weeks is foolhardy.

Nevertheless, it does appear as if the flow of oil and natural gas to Europe from Russia will be drastically reduced for many months, even years. President Biden has shut off Russian oil imports to the United States, and Germany has cancelled the Nord Stream 2 pipeline. This situation has led to the price of oil reaching near-record highs. (At the time of writing West Texas Intermediate crude is at $105.6 per barrel.) It is quite possible that Russia will find new markets for its oil and gas. These commodities are fungible, so it is possible that prices will reach a peak, and then move down. Nevertheless, it seems likely that oil and gas prices will stay high for quite some time.

These high prices may help alternative energy decisions and investments. Already senior politicians in the United States are saying that we should be pushing renewable energy sources much faster, if only to insulate ourselves from events such as we are witnessing.

On the other hand, the war in Ukraine has taken attention away from other equally important issues. For example, as we discussed in last week’s posts (such as Another Clunky Sentence) the latest report from the IPCC attracted even less attention than would normally be the case.

One consequence of the oil crisis of the 1970s was that automobile fuel efficiency, particularly in the United States, improved markedly. Maybe the current crisis will lead to a similar reduction in oil use due to a switch over to electric vehicles.

In the meantime, the fighting needs to stop for the sake of the people of Ukraine.