Oil prices soar

Here we go again, a repeat of last summer and $5/gal gasoline by fall.
The increase in oil further validates need for renewable energy solutions.
What price will I lock for oil this year???
$4.67 last year
$6 + this year ?????
Time to buy my Geothermal system before they sell out!

This article from Energy and Capital says it all... http://www.energyandcapital.com/articles/cleantech-oil-prices/885



Oil Implications for Cleantech Investors
What Cleantech Investors Need to Know About Oil Prices
By Chris Nelder
Wednesday, May 27th, 2009

The future price of oil is a vitally important consideration for cleantech and renewable energy investors. When prices are high, it's good for cleantech, and when they're low, it's bad. Yet too few cleantech investors are equipped with the ability to forecast them.

The price of oil is set daily and globally by a complex interaction of many factors, including supply and demand, relative valuations of currency, speculation in oil futures, delayed feedback loops, economic growth rates, money flows of large investors, geological factors, geopolitics, and many more.

Oil shot to $147 in 2008 because of a particular highly leveraged alchemy of those factors, and it fell to the low $40s today as the leverage unwound and global recession took its toll on demand. Such volatility makes for an extremely cloudy investment outlook, particularly when the investment horizon is measured in decades. That volatility is likely to increase in the coming years.

In order for cleantech investors to succeed then, they must have a deep and rigorous understanding of these factors and be able to anticipate oil prices.

Here are a few essential clues to reading the oil markets. (See also my article of last week, "Updated Oil Price Outlook.")

Global Oil Production Has Peaked
The rate of global conventional crude oil production has been stuck at roughly 74 million barrels per day (mbpd) since 2005, despite a tripling of oil prices over that period, ending oil's long history of supply growth. This is predicted by peak oil models, which describe how oil production grows, peaks, and then falls in a rough bell curve shape for any given oil producing region. All increases in "oil" supply since 2005 have come not from regular conventional crude, but from unconventional liquids such as heavy and deepwater oil, oil sands, natural gas liquids, and biofuels, bringing the world supply of "all liquids" to between roughly 84 and 86 mbpd since 2005 (Energy Information Administration, April 2009 International Petroleum Monthly).



Figure 1: World Oil and Gas Production Profiles, 2008 Base Case

Source: Colin Campbell, ASPO Newsletter No. 96, Dec. 2008

A close study of the all liquids peak reveals a bumpy plateau from roughly 2005-2012, after which oil production will go into terminal decline. The absolute peak will likely prove to have been July, 2008.

The International Energy Agency (IEA) projects that under normal circumstances with regular maintenance and investment, simple depletion of mature fields will cut about 5% from the global supply each year, which is far in excess of what new oil projects may hope to offset.

While the world is certainly not "running out of oil," since nearly half of it is yet to produce, the world has definitely run out of cheap and easy oil. From now on the oil we produce will be progressively harder to get, and more expensive. This point has been emphasized in recent years by the CEOs of nearly all major oil companies, as well as the major oil data providers like EIA and IEA.