Fossil fuels are derivatives of plants and animals that have been fossilized. They make up three major fuel sources: oil, coal and natural gas. These three fuel sources are primary sources used to meet electricity and energy demands of the world. They are non-renewable, thus will eventually be depleted. Fossil fuels are mined and sold on the global commodity market and have been subject to worldwide price fluctuations since the 1960’s. Fossil fuels are usually highly priced to benefit oil producing nations. Evidently, we have recently seen such fluctuations as oil prices fell in the summer of 2014 but are now slowly recovering. The increasing demand worldwide for renewable forms of energy challenges the dominance fossil fuels have in the world.
The four main reasons behind the rise in renewables:
- As the world dynamics related to renewable energy are changing, there is an increased shift from fossil fuels to renewable energy as more countries are capitalizing on the benefits and energy potential renewables have and both developing and developed countries are investing more in renewable energy.
- With increasing technological advancements, renewable energies are having a significant impact. More economies are finding efficient and creative new ways of producing and storing renewable energy to meet the rising energy demand of the world.
- As investments in renewable energy are rising, there is an improvement in the economics of renewables. Renewables are getting cheaper than oil as oil prices have already begun to increase in 2016. This increases the competitive nature renewables bring to the table, challenging the position of fossil fuel derivatives. With many renewables subsidizing schemes set in place, there is also an increased advantage over fossil fuels.
- The link between oil and renewable energy markets is weakening as renewables are mainly used in the production of electricity whilst oil is used for transportation, from cars to planes. Even though the gas market is sometimes linked to the oil market, gas is relatively cheaper and complements renewables as a backup source of energy since renewables depend on the weather (wind and sun availability, etc).
Finally, the changes in fossil fuels and renewables are something to think of for the future as we are slowly running out of fossil fuels. Renewables are on the rise and surely will overtake the position fossil fuels have now.
Mckinsey & Company ” Lower oil prices but more renewables, what’s going on?” and Frankfurt School FS-UNEP Collaboration for Climate & Sustainability Energy Finance “Global Trends in Renewable Energy Investments 2015”