International oil giant Shell announced this week that it plans to suspend funding and research into solar and wind alternatives to fossil fuels. Shell also said it does not view hydrogen as a viable energy alternative either, but that it plans to continue its work on biofuels, Reuters reports.

Energy analysts cite the huge drop in oil prices since last summer as the key reason that Shell pulled the plug on renewables research. “It’s not much of a surprise given the current oil price environment,” says Ian Nathan, senior research analyst at Energy Intelligence. "Shell, like any other oil and gas company, has shareholders it’s responsible to, and in an economic downturn, where revenues are under strain, it would seem to make sense for the company to focus its spending on its bread and butter business, which is oil and gas.”

In a strong indication of how the sour global economic climate has hit Shell, the company posted a $2.8 billion loss in the last quarter of 2008 – its first loss in a decade, according to the New York Times. Still, the energy colossus made over $26 billion in profits for the year, thanks in part to oil barrel prices hitting record highs last summer.

It’s not clear how Shell’s cuts might influence long-term alternative energy investment by other major international oil players such as BP and ExxonMobil.

Enviros were outraged at the move. Shell has “rejoined the ranks of the dirtiest, most regressive corporations in the world,” John Sauven, the executive director of Greenpeace UK told the London Times. “After years of proclaiming their commitment to clean power, they're now pulling out of the technologies we need to see scaled up if we're to slash emissions.”

From 1999 to 2006, the petroleum conglomerate spent about $1.25 billion on non-fossil fuel research, Reuters reports, with wind power leading the way.

Nathan doesn’t think this is the end of the road for Shell and green energy exploration, however. “I wouldn’t count them out,” he says. As the world economy recovers, some analysts expect oil prices will rebound to the point where the company will want to diversity its energy portfolio again.

Image Credit: National Energy Technology Laboratory / Department of Energy