Vancouver, Canada - The year started off with oil reaching $100 per barrel for the first time in history.  This could be good news for the oil industry but how will rising oil prices impact green business?  The obvious answer might be a more urgent shift toward renewable energy; but the likely answer is, at least in the short-term, there may be no impact at all.

Record high prices for fossil fuels and concerns over security of supply immediately prompt thoughts of shifting to indigenous renewable energy sources.  The most apparent environmental benefits associated with triple-digit oil prices are reductions in fossil fuel consumption, reduced greenhouse gas emissions, and increased incentives for companies and governments to invest in renewable energy sources.

"As gas-fired electricity becomes more expensive, there are more and more places where you can build wind farms that are competitive or cheaper," said Steven Sawyer, executive director of a Brussels-based industry group, the Global Wind Energy Council (GWEC).  "At current international gas prices, there would be some place in just about every country in the world where wind would be a better economic option."

Although the green energy sector is expected to grow significantly in the next few years, oil prices have little to do with the current pace of renewable energy roll-outs.  The simple truth of the matter is that most renewable energy technologies are not at a stage where they can replace fossil fuel sourced energy supplies.  Even by 2030, renewable energy such as solar, wind and hydro are expected to account for only 10% of the global energy supply according to the 2007 World Energy Outlook report. 

Even now, wind turbine projects face a 10 year backlog because the demand for turbines is outstripping the available supply chain.  Although this is good news for wind turbine manufacturers who have a decade of business on order, it means wind energy will not be ready to significantly replace fossil fuels within the next few decades even if oil prices climb higher.

Solar power as a replacement energy source also suffers its own drawbacks, mainly the efficiency of the technology relative to other energy sources.  Solar technology is expected to become more energy efficient, but it is decades away from replacing oil and fossil fuels for the bulk of the planet’s energy needs.

Alternate fuel technologies for vehicles, although experiencing considerable consumer support and effort by the automotive industry, are still in their infancy.  Plug-in hybrid vehicles will receive real world operational and market testing in 2008, and may well be the next logical stage in the evolution of the automobile. But sticker price premiums and relative inefficiency of associated battery technologies will remain major limiting factors to the widespread distribution of such vehicles for at least the coming decade. 

Fuel cell and plug-in electric vehicles are even further away on the horizon, hindered in part by a plethora of technological limitations and the lack of supporting infrastructure, which could take two or more decades to become reality.

Biofuels are expected to make their mark this decade, especially in the United States, where new emission standards and energy policies are expected to double ethanol use by 2030.  Unfortunately, even when doubled, ethanol will only remain 4% of the US energy sector.  With the prospect of a looming food shortage spurred by the development of India and China, the world’s most populace countries, other nations may feel less inclined to tap into food stock biomass or to convert prime agricultural land for energy fuel production.

Although not renewable, nuclear energy is viewed by many as a cheaper and ‘greener’ energy source than fossil fuels, and the world is in the midst of a nuclear renaissance. The revival of nuclear power’ on GLOBE-Net).  Many believe nations will turn to nuclear to mitigate the impacts of peak oil pricing, and to help lessen greenhouse gas emissions.  Although many nations, including Canada, the United States and Britain, are returning to nuclear energy for such reasons, the sector is plagued by a backlog of technology and major shortages in knowledgeable manpower.

Since most of the developed world abandoned nuclear energy in previous decades, there has grown a global shortage of nuclear ‘experts’ which includes developers, suppliers, engineers and technicians.  With so many projects around the world on the planning board, there are labour and parts shortages that will remain for some time and which will slow down the coming on line of new nuclear power plants for at least another decade.

Many predict that the same economic imperatives of oil prices that could drive the development of renewable energy will more likely prompt the further exploitation of coal and oil sands.

"High oil prices also make really nasty oil and petroleum development projects financially attractive," says Steven Sawyer.

Coal accounts for 40 percent of the electricity produced in the world, according to the International Energy Agency (IEA) and its use is expected to rise with the anticipated growth of the Indian and Chinese economies.  Several of the world’s largest economies - including China, the United States and India - are digging into domestic reserves of coal and global coal use is expected to climb by 73% by 2030.

As oil prices climb, Canada has become more interested in profit potential of its domestic supply.  Twenty-five billion dollars has been invested in the extraction oil from Alberta’s oil sands, which is one of the largest oil deposits in the world.  However this is being done more for oil revenue than to alleviate the cost of oil to Canadians.  Regardless of where the oil comes from, or how large are Canada’s oil reserves, oil is a globally traded commodity and there is one world oil market and thus one world price.

The bottom line is the consumer.  If the consumer is willing to pay for high priced oil, then oil will continue to dominate the energy market.  After the oil shock of 1979, American oil consumption declined by almost 3.5 million barrels a day and didn’t recover from that drop until the mid 1990s.

In 2008 the same trend is not occurring.  Instead consumers are absorbing the growing price of oil and energy consumption continues to rise.  The United States, which consumes a quarter of the world’s crude, retains its taste for big cars and energy-devouring homes. That’s largely because the U.S. economy is more energy efficient and most Americans spend less of their disposable income - about 4 percent - on gasoline than they did in 1980 (about 6 percent).

Canada as a net-exporter of oil stands to gain from rising oil prices, which on a macro scale diminishes the incentive to push for a more rapid roll-out of alternate energy sources.  Instead the government has tended to focus more on developing fuel efficiency technologies and on energy conservation.  With a lifestyle built around fossil fuels and the strongest Canadian dollar in thirty years, it seems Canadians are willing to pay for the rising price of gas. 

Whether oil is priced at $50, $100 or even more per barrel, it likely will be business as usual for the next decade at least. Although new breakthroughs and new renewable energy investments will take place, our dependence on the carbon economy will remain for some time. Renewable energy projects motivated by national greenhouse gas emission targets will continue, but consumer oil prices will not be the main driving factor.

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For More Information: Agence France-Presse