Low Oil Prices Can’t Kill the Solar Energy Boom 0

520-fool-chartThere’s a common feeling on Wall Street that a drop in oil prices will have a big impact on solar energy companies, especially if prices stay low for long. You can see in the chart below that solar stocks have almost exactly followed the falling price of oil over the last three months.

What’s strange about this trend is that oil has little to nothing to do with the solar energy industry. Solar energy produces electricity, which is dominated by natural gas and coal production throughout most of the world. Those are its natural competitors, not oil that’s turned into gasoline to fuel your car.

How the market gets solar energy wrong
The general assumption in the energy industry is that all energy sources are somehow correlated. For decades natural gas and oil were somewhat correlated, in part because heating oil and natural gas could both be used to heat homes. If the cost of one went down, demand went up, and prices rose again.

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