Renewables complement oil and drive higher prices.

This empirical analysis provides significant insights into the short-term and long-term relationship between WTI oil prices and various factors, including U.S. crude oil production, global oil prices, natural gas prices, renewable energy production, and clean energy company returns. Our findings suggest that renewable energy production currently complements crude oil production, rather than substituting it, with an increase in renewable energy production associated with increased oil prices when crude oil production remains constant. Our model is represented by stochastic variables in nature, but there is a long-term equilibrium towards which the considered set of variables converges over time. The deviation from the equilibrium trajectory is corrected very quickly because the speed of adjustment is very high.

Currently, various policies and investment efforts are being applied to stimulate the production of energy from renewable energy sources, and as a result, an increase in energy consumption from renewable energy sources is expected. Since renewable energy technologies are expensive and these products are expensive, they keep oil prices high.