Green Energy Can’t Compete With $30 Oil

  • Date: 02/03/16
  • Editorial, Investors' Business Daily

With crude at $30 and natural gas at $1.70 (down from $14 in 2007), news pages are full of stories about tough times in the Oil Patch. But the media have been almost conspiratorially quiet on the financial collapse of green energy for the same reason.

Consider a just-released study by University of Chicago researchers on the impact of low gasoline prices on the electric car market, published in the Journal of Economic Perspectives. It found that ‎current battery costs for Teslas and other electric vehicles are roughly $325 per kilowatt hour.

And at that price, the study amazingly concluded, the price of oil would need to exceed $350 a barrel before the electric vehicle was cheaper to operate.

In other words, without massive additional taxpayer subsidies to companies such as Tesla, the price of oil would have to not just double or triple, but rocket more than 10-fold before battery-operated cars make financial sense.

Small wonder why Tesla stock is 32% off its highs, and solar energy shares are down 50% from where they were a year ago.

So why is the government still dropping money down this rat hole?

With the new financial reality of a world awash in cheap oil and natural gas, wind and solar can only survive, if they survive at all, by the government forcing people to buy them and jacking up electricity and home heating prices to families and businesses.  […]

Most of the economic models that predicted green energy alternatives would be financially viable believed that we were closing in on peak oil, and that dwindling supplies would lead to higher and higher prices. Many of these models forecast $100, $200 and even $300 oil.

What they didn’t see coming was the shale oil and gas revolution and technologies such as horizontal drilling and fracking that crashed that party. Drilling costs for these new technologies are falling very rapidly, suggesting that the days of $80 and $100 oil, let alone $300, may not return anytime soon.

Green enthusiasts who still think that financially viable green energy looms ahead, should consider one major finding of the University of Chicago study:

“If the past 35 years is any guide, not only should we not expect to run out of fossil fuels anytime soon, we should not expect to have less fossil fuels in the future than we do now. In short, the world is likely to be awash in fossil fuels for decades and perhaps even centuries to come.”

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