Al Gore, Oil Prices and OPEC joins the environmental movement

OPEC, yes that OPEC (the Organization for Petroleum Exporting Countries) has given alternative energy its biggest boost since….well since the Oil embargo of the 70’s*. Yes you heard me correctly, and no, I have not been drinking. But how? By refusing to increase production or the supply of oil on the global market and with growing demand worldwide OPEC has contributed to oil prices rising as high as $111.00 a barrel. (see chart below)

The high price of oil has made the relative cost of alternative energies such as solar and wind power less expensive. By lowering the relative cost of these alternative energies they become more economically viable (read profitable) resources thus driving investment towards research, development and (cross your fingers)implementation of these alternative energy sources. Put simply, if I am business person, it is much easier for me to ‘care’ about the environment if there may be a long term profit in it for me.

Al Gore spoke across the country, released “An Inconvenient Truth” and raised a significant amount of awareness around global warming and the dangers to our environment, but lets be honest, a majority of the people may voice some concern but most will do little about it. In my experience, people tend not to react to a situation unless there is a tangible effect on their daily lives (….sure global warming is melting the ice caps, raising temperatures and sea levels but I live in Iowa and have to get my kids to soccer practice….what am I supposed to do about global warming?)

However, if you raise the price of gas, now you have gotten the attention of people because this has a direct effect on their daily life; i.e. I have to take my kids to soccer practice in our suburban which gets 8 MPG and it costs me $100.00 a week instead of $60.00 because of higher gas prices. When I go to get my new car gas mileage may very well have an influence on my decision. With this change in people’s consumption of more fuel efficient cars, in a free market, there will be a change in production to meet this new demand.

Al Gore was rhetoric and education, OPEC is dollars and cents. In the end, in a market economy, for better or worse consumers will make choices on necessities such as energy (electric, gas etc.) based on price, all things being equal. The producers in the economy will make choices based on cost and profits. By limiting the supply of oil OPEC has raised the price of oil and made the choice of both the producers and consumers in the economy to ‘go green’ much easier. So you could very well argue that the biggest influence on the environmental movement towards alternative energy is….OPEC.

So thanks for the pep talk Al, and OPEC, welcome to the environmental movement (just remember to hold supply steady and keep those prices rising.)

*You may remember President Jimmy Carter installed solar panels on the White House in late 70’s to show his support for alternative energy. Ronald Reagan tore the panels off when he got into office in 1980.