Solar City (NASDAQ:SCTY) is a leading US provider of solar energy installations. While it lost social activist investment partner JANA, it gained additional investments from Elon Musk and Tesla. The stock rebounded after the Tesla investment and rallied up most recently based on the company’s announcement that it will now expand its services to homeowners in Western Pennsylvania. Solar City closed the day at $29.43 (as of April 12th), more than 4% gain. However, because it is tied to oil, the stocks risks falling again. We are discussing these risks below.

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Measured by the Price of Oil

Traditional market analysis suggests that as oil prices fall, solar energy becomes less attractive. In the markets, the value of this stock is tied to the savings from solar fuels over crude oil. This analysis sheds the stock of its support from socially conscious investors and those nations such as India and China that wish to transition away from severe pollution hazards.

By the Numbers

To the extent that the market measures the value of solar energy as a commodity that replaces oil, the SolarCity stock seems overvalued. With no end in sight to the global oil situation and low oil prices, many analyst down grade SolarCity for the limited reason of the low price of oil. It is true that in the past alternative energy projects fell into disuse when oil process crashed. Consumers and businesses did not want the adventure of new fuel sources if oil were cheap and abundant. Solar energy has grown into a technologically mature source of heating and fuel for vehicles. Advances by Tesla in electric storage for commercial and residential locations have put solar energy on an equal footing with natural gas and electricity as workable energy for personal transportation, and home heating and cooling.

Jobs and Economic Growth

Solar energy offers advantages in related economic policies favoring job growth, environmental progress, and economic expansion. Examples include the recent agreement with Whole Foods to install rooftop solar systems as part of a national program. The political initiatives under current discussion include broad scale solar installations across the US for residential and commercial users. This would include interface systems to provide electric power for tools, equipment, and vehicles. The long-term goals are to increase alternative fuels usage, add significant numbers of high-paying jobs, and reduce reliance of foreign and domestic sources of crude oil.

Reading Political Tides

The essence of this analysis is that the political outcome in November 2016 and beyond will determine whether the solar sector has a new rebirth or continues along a more troubled path. Political choices, in the US in particular, will have an enormous impact on the solar industry. A national drive to empower solar as an energy source of choice for tens of millions North American households will shape the industry for years to come. Combined with new impetus in Western Europe to spur growth, the solar industry could benefit from a trans-Atlantic boom that will reverberate globally. Some giant economies seek solutions to bad city air and water pollution. Solar energy would provide a quantum shift in environmental dynamics.