Business·Analysis

Cheaper oil a threat to green energy: Don Pittis

Rising oil prices have helped push people away from gas guzzlers and improve the economics of green energy alternatives. Don Pittis looks at whether falling oil prices will have the opposite effect and make global warming worse.

As the price of crude plunges, will Canadians forget fuel-efficient cars and green energy?

A worker walks past a newly installed solar panel on the roof of the police station in Halifax. Will falling energy prices make green power less viable? (Andrew Vaughan/Canadian Press)

Most people like it when gas pump prices fall. But in a selfish way, I liked it when fuel prices were rising. It made me feel smart.

It's not because of my investments in the oil industry. Just the opposite. We made a family investment in green technology, and made out like bandits. Now the question is, with oil prices falling, will the economic advantages of green investing start to disappear?

Our green investment wasn't as dramatic as taking a stake in a windmill or putting solar panels on the roof. 

But five years ago, we bought a "clean diesel" wagon that at the time produced less carbon per kilometre than any non-hybrid internal combustion car. And boy did that investment pay off.

Rising fuel price crunch

Using Ontario government statistics, instead of my own less reliable memory, diesel was selling for about 80 cents a litre when we bought the car in 2009. The data shows that over that time, fuel costs rose by more than 10 cents each year, peaking at just under $1.50 a litre this spring.

So whatever advantage we thought we were buying back in 2009, every time fuel got dearer that green decision looked better and better.

But now that oil prices are falling, does that economic motivation disappear? Not just for efficient cars, but for green energy in general? It's happened before.
In the 1970s, small Japanese imports swept the North American market because of the oil crisis, but people soon turned back to gas guzzlers. (Honda/Associated Press)

"There was an initial wave of interest [in green energy] in the aftermath of the oil shocks in the 1970s," says Mark Winfield, a York University professor who studies the political economy of energy. "Interest in renewables at that stage did fall off once the price began to fall again."

It was also in the wake of the OPEC crisis in the '70s that the Honda Civic, much tinier than the current model, arrived in Canada as consumers demanded more fuel-efficient cars. There too, as oil prices fell from their highs, people strayed back to gas guzzlers.

According to the Washington Post, Americans are turning back toward Hummers and SUVs as gas prices plunge in some places below $2 a U.S. gallon or 60 cents Cdn a litre. "That's not good for Tesla," says the Post, referring to the luxury all-electric car company own by entrepreneur Elon Musk.

Switching to Hummers?

Low gas prices may mean people are not choosing cars with the best fuel economy just now, but Winfield says new North American fleet economy rules means even big cars will still be greener.

"Because of climate change concerns we've locked in fuel economy," says Winfield. "Both the U.S. and Canada have adopted standards that preclude going backwards to gas guzzlers."

As for green electricity, the price of oil will only have a small impact, says Winfield. "We don't actually burn much oil for electricity generation purposes."

Instead, alternative power sources like wind and solar are in direct competition with natural gas and coal, which are already cheap. The plunging costs of green alternatives, especially solar, means they are quickly getting to the point where they will be competitive even without special subsidies he says.

In our family, we're hoping our car lasts a few more years. But when the day to get a new one arrives, we'll still buy the most fuel-efficient car that fits our needs and our budget, even if gas is cheap.  

Climate change may not yet be priced into the cost of oil, but in our circles, at least, showing you care about the future of the world inherited by people's children and grandchildren means a greener car pays off in status. 

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.

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