Will Declining Oil Prices Affect Alternative Energy Industry?
Nov 17, 2008
Since the price of oil has dropped over 50% in the past year, what effect will it have on the alternative energy industry as a whole?
With cheap oil available, the public outcry has calmed for new sources of energy. Although this pricing condition is short-lived, the meltdown in the financial sector might have a more lasting and negative impact.
For example, the ethanol industry has seen its share of problems recently due to the skyrocketing costs of corn. However, as all commodity prices have become turbulent in recent months, some ethanol producers have not adjusted to volatile price swings, and firms such as VeraSun Energy Corp., have filed for Chapter 11 protection.
The $700 billion government bailout includes an 8-year extension of solar power tax credits, which is very positive. However, absent an influx in capital investment funds, this industry will not advance as quickly as once believed.
Wind power has also been given a one-year extension of production tax credits. Again, being that this industry is capital intensive, its growth rate will also slow to a crawl.
With a new administration promising $150 billion over the next ten years in alternative energies, it comes at a very opportune time.
Let’s hope the American people will not be lulled into thinking oil pries will continue to fall forever. The time for investment into clean energy is now.