Alternative energy And Economic Recovery
If we are within a decline, why is oil trading at about $80 per barrel anyway? May be the world running out? No, the world is not running out of oil, however there are other challenges such as may possibly to bring oil on the end user.
Case in point: For oil producers to generate a profit on their oil production, the price of oil needs to actually cover $60 to $70 a barrel. If it falls below some $60, drilling and research experience a major decline with an equivalent drop in output, placing future demand at wager.
Many investors believe that offshore oil from countries like Brazil that have major untapped reserves always be the solution. What is not fully appreciated is how the break even amount to obtain the oil from these sources that are just about 36,000 feet deep can be $80 per barrel. After which it is we ask have must ourselves: Is deep sea oil even viable since the BP oil spill injury?
Let's re-assess the oncoming of the current recession which started around first quarter of 2008. Note that at that time, oil went over $100 per barrel and traded there for about the next 2 quarters. During right away . months the effect for that economy was apparent towards the majority of people. Federal government denied we were within a downturn, but the public was conscious enough to understand that the economy what food was in suffering.
Then, the recession that was not much a recession, was eventually confirmed to be one a few weeks after the fall of Lehman Brothers in September of 2008. From there the economic downturn morphed into the most severe economic downturn since the Great Depression. Now the recession that wasn't an economic downturn is going the recovery that is absolutely not a recovery which is obvious because of high unemployment and real estate foreclosure levels.
So what would it take to cause a spike in energy to over the $100 range the economy at risk? How about a geopolitical event in the center East? Or a terrorist attack on the major oil producers facilities? How an attack on commercial vessels in the Straits of Hormuz where 40% belonging to the global oil transits? If you recognize one of those events is far fetched, simply activate the news and listen to the current events in the middle East. It seems we are concerning the brink of a major geopolitical event.
A geopolitical event or terrorist attack notwithstanding, increased oil demand from the creation of China and India could easily drive oil prices well past $100 per barrel within your next year or so. The higher oil prices go, the more vital a coherent alternative energy system on a domestic and global scale would be demanded.
It is easy to surf the web and find out about advances in offshore wind power, solar power and hydrogen fuel cell technology. The recent developments in electric / hybrid transportation are notable also. While significant progress is taking add these areas, it isn't anywhere near satisfactory to ease concerns of the current rate of rising energy costs.
The bottom lines is this: Which offers substitute fuel supply, minimally on a back up basis, is not developed very soon, your rise in energy prices which are surely coming could take this recovery which isn't a recovery and turn it into a depression that IS a depression. Which will require place first?