The bizarre collapse in oil prices reflects a world largely shut at home. People are no longer driving much or flying at all. Factories are silent. The supply hasn’t changed radically in the past month. It’s the demand that’s crumbled.

Environmentalists, hold that thought.

Froma Harrop

Friends on the environmental left are not always swift at gauging how the laws of economics should play into policy on climate change. Case in point, there’s talk that rich climate activists might buy some of the oil reserves for close to nothing and make sure that the fossil fuel never gets burned, according to Bloomberg.

Here’s the problem with that — actually, several problems: In response to plunging oil prices, Saudi Arabia, Russia and 21 other oil-producing nations recently agreed to restrict output to buoy it. That obviously hasn’t worked. Why would environmentalists try to help them by cutting the availability of oil? Not that they have a fraction of the resources to make a difference.

But even if they wanted to do this and it would make a difference, they’d be helping weak or deeply indebted players in the fossil fuel industry stay afloat. Even before the coronavirus hit, energy prices were swooning because of falling demand.

Power companies had been replacing natural gas (and certainly coal) with wind and solar energy, causing it to tumble in price. As a result, demand for natural gas was expected to fall 13 percent in the next decade, Morgan Stanley said in December. The global economic shutdown will undoubtedly greatly inflate that number.

And there’s the question of whether the continuing threat of this and other viruses will have changed work, commuting and shopping patterns well after the immediate crisis. Some plans for reopening businesses already envision fewer workers at the office and more operating from home. And with teleconferencing no longer a novelty, there’s a likelihood of people working together from different locales.

So what would have been the point of a ban on oil and gas fracking, as former presidential candidates Bernie Sanders and Elizabeth Warren advocated? It would have amounted to the government getting blamed for job losses in the fossil fuel energy sector at a time when market forces were already closing down rigs.

There are valid environmental concerns that dirt-cheap oil and gas will make clean energy less competitive on price. That and scary times have eaten into sales of home solar installations. Who is doing home improvements these days? Research firm Wood Mackenzie, which had predicted a 10 percent increase in national residential solar sales this year over last year, now says that they could fall as much as 34 percent.

(One bright little aside: Skies cleared of smog have helped Germany’s solar panels generate record amounts of electricity.)

Wood Mackenzie thinks worldwide electric vehicle sales will drop 43 percent this year. However, Brad Berman, who covers electric sales at Electrek, told Barron’s that “the EV market is more resilient than the overall market.” For one thing, these buyers tend to have higher incomes and can power through a tough economy. For another, global auto emissions standards provide a tailwind for electric vehicle sales.

Of course, a tax on carbon would help. Many conservatives as well as many liberals have supported the idea. All the Democratic presidential candidates backed it except for Sanders and Tulsi Gabbard. Republican leaders oppose carbon taxes because they’re largely owned by the fossil fuel industry.

What’s been good for the environment is not crashing oil prices but the reason they’re crashing. The world is awash in oil that no one’s buying. It’s demand that we need to dry up — and that happens when technology enables the development of more clean energy at competitive prices.

Froma Harrop is a syndicated columnist. Follow her on Twitter @FromaHarrop. She can be reached by email at: [email protected]


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