Is renewable energy the real victim of the oil price war?
When Saudi Arabia tried but failed to push the US shale producers out of business in 2015/16, it only served to prove what many had suspected, that both Russia and Saudi were no longer the only kingmakers in the oil market.
It probably takes Saudi about two weeks to a month to switch on new supply (and a lot less to switch it off), meaning that Saudi has the overwhelming resources and economics to win the war with Russia. In any event, we believe that the US government will step in to support the US shale industry, as it did its investment banks, because it sees the shale producers as a key strategic asset. Once this war is over, oil prices will swing back to our $55-65 range, and do so very quickly. Price wars in most industries tend not to last as long and buyers hope.
Cheap oil stimulates economies but is unattractive to energy investors. Renewable energy is now a significant force in terms of attracting capital for energy investment and if this oil price war is short lived it could lead to an acceleration in Renewable energy’s market share at the expense of fossil fuels. If, however, it is prolonged, it will serve to dampen interest in renewables that cannot compete with the cost of oil in terms of cost of production of a unit of energy.
