Hotelling’s switch point just got later

Hotelling’s Rule is a theory of nonrenewable natural resources that says that prices of such resources will rise at the rise of interest over time (all else equal). When there is a backstop fuel, think renewables like wind and solar, the “switch point” is when society switches from nonrenewables to renewables because the price of renewables is lower. I’ve posted the video from my 2000 level class that discusses the switch point below. Of course, it is out of context so a masochist will want to start at 10-1

All that is background to this story from the WSJ: BP’s CEO Plays Down Renewables Push as Returns Lag. Here is the gist: 

BP Chief Executive Bernard Looney plans to dial back elements of the oil giant’s high-profile push into renewable energy, according to people familiar with recent discussions.

Mr. Looney has said he is disappointed in the returns from some of the oil giant’s renewable investments and plans to pursue a narrower green-energy strategy, the people said. He has told some people close to the company that BP needs to do more to convince shareholders of its strategy to maximize profits in areas where it has a competitive advantage, including its legacy oil-and-gas operations.

In some of the conversations, Mr. Looney has said he plans to place less emphasis on so-called ESG goals—a catchall term for environmental, social and governance—to help clarify that those aren’t distracting the company from its ability to deliver profits, the people said.

Mr. Looney, the people said, is casting the moves as a modest short-term course correction rather than a major strategic pivot for the 114-year-old company.

The article continues will details but it sure looks like this is some evidence that Hotelling’s switch point is moving further into the future. 

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