U.S. Economy’s Troubles Hurt Alternative Energy Plans

While the high price of oil over the summer made alternative energy and renewable fuels more attractive to Americans, the plunge in the stock market and a drop in oil prices put those incentives at risk, according the The New York Times.

Furthermore, while both major-party presidential candidates, Sens. John McCain and Barack Obama, have made alternative energy proposals a central part of their campaigns, there is debate about whether they would be able to fund their ideas while paying for a bank bailout and coping with falling tax revenues.

“Government funding for (renewable energy) is now going to have to compete with levels of government funding in other areas that were unimaginable six months ago,” Mark Flannery, an energy analyst for Credit Suisse, told the New York Times.

Oil prices stifle change

	As gasoline becomes cheaper, people could become less interested in more fuel-efficient or alternative-fuel vehicles.

OPEC, a group of twelve countries in the Middle East, Africa and South America, announced on October 24 that they were going to produce 1.5 million less barrels of oil a day. This is an effort to limit supply and therefore drive up the price of oil.

The same day, the price of oil fell to $62 a barrel, the lowest price in 17 months, and half as high as it was in July.

"Recession fears and uncertainty continue to haunt global markets, while tight credit conditions threaten new energy projects all over the world," market analyst Nimit Khamar told the Agence France-Presse news organization.

While oil’s lower price makes it cost less to fill a car with gasoline, it also means that many people won’t be concerned enough to buy a car that gets better miles per gallon, or experiment with electric cars or wind and nuclear power.

Capital problem

	Investment in new alternative energy projects is dropping as the economy slows down around the world.

Banks and investors are afraid to loan to each other, and that means less lending to companies who want to develop wind and solar.

And as the price of oil falls, investors are nervous that new types of energy would not find enough of a market to make money. 

Investments in new wind, solar and biofuel projects dropped from $23.2 billion in the second quarter of the year to $17.8 billion in the third quarter, with a larger slide expected for the fourth quarter, the New York Times reported.

Candidates may face changes

	Both major-party presidential candidates might need to change their energy policies due to new economic factors.

Obama promises to spend $150 billion over 10 years to help invest in alternative energy sources, which he says will create 5 million new jobs.  He wants 10 percent of America’s electricity to come from alternative fuels by 2012.

McCain’s plan focuses on expanding oil drilling in America, a $5,000 tax credit for people who buy a zero-carbon emission car, and expanding the number of nuclear power plants, in addition to other tax credits and cuts to encourage alternative energy sources.

But as the economy tanks and people spend and make less money, the government will collect less revenue in taxes, making it harder to fund expensive alternative fuel projects, while still paying for basics such as roads, schools, courts and the military.

During the presidential debates, however, both candidates refused to name which projects they might cut from their proposals.