Conventional wisdom has it that the low price of gasoline will not harm the wind industry, mostly because oil and wind function in different areas of the economy. The wind industry produces electric power. The oil industry largely does not. However, the two are linked in a way that may provide good news for the wind industry.
Drillers originally found natural gas in U.S. shale formations. But the shale also produced crude oil which was treated as a byproduct. More recently, shale drillers shifted focus to crude oil because it could fetch over $100/barrel. Natural gas became the byproduct because it was cheap, hovering around $3/million BTUs for the last few years.
Now the fall of crude-oil prices have removed the impetus to drill. Some North Dakota drillers have shut down operations because they are unprofitable. These shutdowns, of course, reduce the supply of both oil and gas, which would push up its low cost.
Suppose the drop in supply boosts natural gas prices to $5/million BTUs or more. If so, the wind industry will be the sole possessor of the title: Lowest-cost power producer. And the change in status should give investors reason to reconsider the wind industry. Of course, a growing economy that demands more power would not hurt anyone.
That’s what I think. What do you think?
– Paul Dvorak
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