By Timothy Gardner

WASHINGTON (Reuters). The price of oil has risen to $100 per barrel. This raises a question: Does this spike in oil’s notoriously volatile market speed up global efforts to transition away from fossil fuels and to more sustainable energy options to combat climate change.

It is unlikely.

Analysts from the energy industry say that rising gasoline and diesel prices will encourage consumers to switch to electric vehicles more easily and spur investment in other clean technologies such as hydrogen.

These high prices, however, will encourage more oil and gas drilling all over the world. As fossil fuel companies scramble to get cash, the boom could turn into a bust. This will again make oil affordable and plentiful.

This is the same pattern the oil age has repeatedly shown, one which has served to punish clean energy investors in the past.

Below are some arguments from either side.

CONSUMER SHIFT

When fossil fuel prices rise, consumers start to take electric vehicles and clean energy alternatives more seriously – not just for their environmental benefits but in hopes of eventually saving cash. The scenario was created after oil reached $175 per barrel in 2008 and gave rise to electric car sales.

Electric vehicles have a growing global market, with a particular focus in China and Europe. The United States is seeing fewer sales.

The Paris-based International Energy Agency (the industrialized world’s energy watchdog) has stated that rising oil prices may increase the speed of electrification and accelerate the transition towards renewable power sources such as solar and wind. Their costs have fallen in recent years.

The IEA estimates that sales of fuel-guzzling utility vehicles (gas-guzzling) in 2021, a year marked by steadily rising oil price, will reach 45%. That would make it a record volume as well as market share.

The SUV market has reacted to the efficiency gains made by EVs, and raised concerns about how high oil prices might affect the transition.

Analysts point out, however, that vehicles and trucks use only 20-25% to transport the world’s petroleum. Other sectors like manufacturing, maritime transport and aviation make very little fuel-efficiency gains.

Claudio Galimberti of Rystad Energie, an analyst in Oslo said that there has not been any energy transition.

HIGH-PRICES SPUR Drilling

Yet another dynamic is in play. Oil has experienced a boom-and-bust cycle for decades. High oil prices have sparked investment in oil drilling, which in turn leads to lower oil prices, increasing demand. This time is unlikely to be any different.

The United States is the largest producer of oil in the world. Drillers have begun to increase their output. The U.S. Energy Information Administration predicts that oil production in the United States will soar to an all time high next year, surpassing the record 12.25 million barrels per hour set last year. This is before it peaks at 13.88million bpd for 2034.

This trend would not be slowed if high prices were a factor.

The majority of world’s oil resources, or 65% in total, is meanwhile controlled either entirely or partly by the state.

Because they’re among the lowest-cost producers of crude oil, the governments of Saudi Arabia and Russia as well as Iran, Iran, and Iraq, all of them quickly become richer with rising oil prices. This trend, according to researchers, deepens the commitments to the petroleum economy.

Paasha Mahadavi, University of California Santa Barbara political science professor, said that “high oil prices prolongs the idea even among the highest-cost producers of national oil companies that it is possible to survive the energy transformation, rather than working on transitioning away from oil to clean energy.”

These statements also support the belief that oil reinvestment is the best way to balance government budgets, both in the present and the future.

But there are some subtleties: Saudi Arabia for example is leading an effort at producing hydrogen with green energy, such as solar and wind power, in its megacity of the future NEOM. It is financing this project with petrodollars.

Mahdavi said that although higher oil prices may allow lower-cost petrostates to keep investing in certain decarbonized options, it is only a very small number.

VOLATILITY RUINS COMPETITION

This tendancy to increase supply and meet high prices leads to volatility.

Rapid price swings can be difficult to plan for and could even cause investors to abandon alternative energy projects. Deborah Gordon leads RMI’s Oil and Gas Solutions Initiative. RMI is an energy research group based in Colorado.

Gordon explained that volatility was the greater risk in an energy transition. It’s not about high or low prices; it’s the ongoing shift.