The case for renewable energy isn’t just environmental, it’s about price stability as well

Since April, the price of a barrel of Brent Crude (the benchmark for oil prices) has dropped almost in half from $120 to $65. This once again reminds us of the volatility of the oil and gas industry and makes the case for why a planned transition away from petrochemical energy is needed.

Just as a reminder; during the independence referendum the price of oil was high and much of the pro-indy movement based at least some of its case on the gains from capturing the tax revenue. Then in the aftermath of the referendum global prices came down sharply again.

For a period of time the arguments reversed; anti-independence voices were gleeful that the price of oil collapsed and the calculations used by the independence movement during the campaign proved to be miles out. There was a feeling around that oil prices would go into a prolonged period of being low.

So much was this the case that the 2018 Growth Commission on Scottish independence (a highly neoliberal piece of work) actually assumed that oil and gas taxation would form no part of an independent Scotland's core budget.

Then came the pandemic, and transportation hub snarl-ups hit energy supply along with other supply chains. This caused a major spike in the price of oil, and this actually predated the Russian invasion of Ukraine. That invasion (in fact, more accurately, the range of sanctions placed on Russian energy as a result of that invasion) more or less froze prices at their peak.

This proved to be one of the two major components in the cost of living crisis – though the evidence suggests the biggest component was price gouging, most of what was seen as 'legitimate rises in the cost of production' could be traced back to higher energy prices.

By the end of last year it was received wisdom that the last received wisdom was definitely wrong and rather than a permanent period of low oil prices, an unstable and fractious world would lead to an era of permanently high oil prices. The actions of the US President appear to be challenging that received wisdom already.

Over this period the cost of generating energy from onshore wind fell by 68 per cent and offshore wind by 60 per cent. Solar prices fell by more like 82 per cent. The cost of storing electricity in batteries has dropped by more than 90 per cent.

Oil and gas is an old industry and it is volatile in price mainly because of markets. The price of renewable energy is not volatile but has been declining at incredible rates over the the last 15 years. The cost of heating from renewable sources is low and constant – if you have a district heating system in place.

There are two separate arguments taking place about oil and gas investment. The high-profile one is the argument about energy transition and whether moving to low-carbon energy is harmful to prices for consumers. There is a totally different argument about long-term investment environments and the long-term price for oil and gas; there is an inherent volatility and frankly investors want governments to share the risk with them.

One of the arguments for energy transition that is not made enough is the case for stable, inflation-proof energy systems. The cost of generating electricity from renewable sources is permanently low and the main input prices do not halve in a month. A system of renewable, domestically-controlled, secure and inflation-proof energy has many more benefits than just being low-carbon.

It is time to embrace the future as the sensible choice rather than fight a culture war on whether the past would be better or not. Full details of how to decarbonise Scotland’s energy can be found in the Common Home Plan.