Oil on OPEC
Last Friday OPEC announced a cut of 1.5 million barrels of daily crude oil production as part of an effort to stabilize crude oil prices. Evidently the commodity did not react as expected, shedding more than 7% more after the news.
It seems that the stability of the global economy is trumping anything OPEC can do to prop up the price of crude. There is still a lot of money leaving the energy markets, either by force or lack of confidence.
Unfortunately, with every down day in the crude market, the foresight of alternative energy comes more into question. Everyone with a vested interest in developing alternative energy is starting to question the security of the decision to steer to wind, solar and other alternative energy sources.
As the price of gasoline slides, efforts from the likes of GM with the Chevy Volt seem to carry less of a return.
I think in the long run crude oil prices will start moving up again. It’s just a matter of how long the alternative plays can ride out the dip.
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I think that it is important to distinguish between oil prices and energy prices. None of us are going to see discounted rates come wintertime on our monthly bills from gas and electricity. Actually, I believe most of us will see higher rates. So I think green technology will definately continue to develope in this area. Wind technology makes a lot of sense in windy areas, solar in sunny areas, and geothermal in geothermal. All of those technologies however have no large scale way of storing the energy, so a significant improvement in the power grid is needed so that the power made can be directly fed to those who need it. That is the next great step in alternative energy.
Oil prices are a little bit different. I think we are seeing who really drove up the cost in oil out there, investors speculating. OPEC and others benefited from that speculation, and certainly don’t want to turn off the tap, but these speculators really jacked it up for us all. As to how it will affect alternative transportation solutions, I think it has already made it’s mark. Just by the population switching to higher mpg vehicles will act as a hedge to companies and investors pushing high prices again, so I think the vehicles are valid and will continue to develop. Or they should do so as long as people continue to purchase those vehicles.
Personally, I think with these falling oil prices that you will finally start seeig these high mileage diesels from Europe finally come to the market in the US. The technology is mature and every major auto manufacturer has engines available so integration could be quicker. They allow for people to use biodiesel, utilize the vehicle close to the sizing that they would prefer (large sedan or whatever), pass emissions standards, and still get high mileage benefits.
The real question is anyone going to buy anything for awhile? I think the population as a whole is in a holding pattern and only those companies brave enough to push product forward will do so (and probably lose money while doing it). We will see, I guess.