Whenever oil prices are cheap, there is no discussion of oil being a limited resource or a cause of pollution or as a source of greenhouse gases.  As prices begin to climb, the voices of conservation, environment and technology, are once again heard.  This latest increase in the price of oil (the last several years) have, excuse the pun, fired the discussion right up.  Terms like $100 oil and Peak Oil, combined with projections of increasing scarcity do to politics around the world, has had the effect of increasing intrest and more importantly implementation, of alternate sources of energy.  In a world so committed to fossil fuels, price is likely to be the most important factor in leading to a switch to renewable energy. This is no suprise to dyed in the wool capitalists, but still hasn’t sunk in with the general public.

The solution to human generated Carbon Dioxide is in the marketplace, as it has always been.  When the price of oil, gas and coal are expensive enough, that alternate energy production becomes feasible, not just possible.  In so much of the industrialized world, there is a shortage of generation and distribution for extreme peak periods, threatening blackouts, somewhere, each summer.  In the industrializing world, read that India and China, there is a serious shortage of power.  Companies that need to work in the world markets, must provide backup power and communications, to prevent regular brown outs and black outs to overcome these obstacles. 

As the world economy and population grows, the need for oil rapidily increases. As demand increases, price increases unless there is additional supplies available to meet the demand.  So $70 a barrel oil is this expensive because of simple “Supply and Demand” models.  Well, not entirely, there are also bad news events that put future, expanded oil capacity online.  Hurricanes in the Gulf of Mexico, Venezuela’s revolution and a 35% drop in oil output, Iran’s production dropping.  When combined with violence in the middle east, nigeria and indonesia production capacity is dropping and the major international oil companies to have been force leave/sell assets to government monopolies in what was once a number of promising new sources.

Finally the last concept, the one that is most controverisal of all factors affecting the oil market specifically and the energy market generally, is the “Peak Oil” theory.  Simply stated, “Peak Oil” states, that 1) Oil is limited resource, it will run out someday.  2) The oil output is now peaking as all the oil that can possibly be pumped out of the ground is now being pumped out at maximum capacity.  I don’t necessarily believe that we have reached that point, but when we do, it should result in a steady, unstopple increase in prices, until demand drops below the production capacity at that time.

So, it summary, there are political worries,  increased demand and a decrease in new major oil fields that are combining to push up oil prices.  As these prices rise solar and wind solutions become increasing affordable.  So while petroleum prices are rising the cost of solar and wind generating deployments are decreasing, the world moves to alternate energy as a response to the marketplace.  Had someone told me back in 1980 capitalism would be the best way to spread the move to alternative power, the “socialist” me would have rolled my eyes in amazement.   And yet…..

This entry was posted on Tuesday, September 4th, 2007 at 3:32 pm and is filed under Global Warming, Hydrocarbon Electricity, Transportation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.