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Wednesday 23 Aug 2017 | 00:48 | SYDNEY
Wednesday 23 Aug 2017 | 00:48 | SYDNEY

How cheap does alternative energy have to be?

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14 March 2008 13:17

President Bush had this to say recently on the message Vice President Cheney would have for Saudi king Abdullah during Cheney's upcoming visit to Riyadh:

I hope that the king will listen very carefully to the vice president when he makes the following points: One, high oil price is damaging markets; and two, the other thing the vice president will say, which is interesting, is that high oil prices are stimulating an enormous amount of venture capital money into alternative forms of energy.

Passport blog interprets Bush as saying that Cheney's mission is to lower oil prices enough to kill off the alternative energy industry. But in order to be competitive, that industry surely needs to be viable no matter what the price of oil. And here, to my economically untrained mind, is a paradox: the cheaper alternative energy gets, the lower will be the demand for fossil fuels, and hence the further oil prices will drop. So eventually, alternative energy will have to compete against a cost of oil near zero, no?

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