As oil sells for in the $ 80 per barrel range and the fragile global economy pushes to recover from the existing decline, the need to invest in alternative energy and build up viable alternatives to oil as an energy supply Becomes even more pressing. Why? Previously, Pls the cost of oil is Greater Than a Certain percentage of GDP, an economic downturn takes place. In today’s economy That figure is about $ 80 per barrel. If Economists are right, that would mean the global economy may be teetering on the threshold of another leg down, if not a financial collapses, Should oil price increase of in considerably higher than $ 80 per barrel.
If We Are in a decline, why is oil trading at about $ 80 per barrel anyway? Is the world running out? No, the world is not running out of oil, however there are other challenges Such as the price to bring oil to the end user.
Case in point: For oil producers to generate a profit on Their oil production, the price of oil needs to be about $ 60 to $ 70 a barrel. If it falls below some $ 60, drilling and research experience a substantial decline with an equivalent drop in output, demand Placing futures at risk.
Many investors believe That offshore oil from countries like Brazil That have major untapped reserves are the solution. What is not fully appreciated Is that the break-even amount to get the oil from these sources is That are up to 36.000 feet deep is about $ 80 per barrel. We ask and then have to ask Ourselves: Is deep sea oil viable even after the BP oil spill disaster?
Let’s re-assess the start of the current recession started around the which first quarter of 2008. Note That at That time, oil went over $ 100 a barrel and traded there for about the next two quarters. During the initial months the effect on the economy was apparent to the majority of people. The government denied We Were in a downturn, but the general public was conscious enough to Recognize That the economy was in Suffering.
Then, the recession That was not 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 That Was not the recession a recession is going through a Recovery That Is not really a recovery is the which is obvious Because of high unemployment levels and real estate Foreclosure.
So what would it take to cause a spike in energy to over-the $ 100 range the economy at risk? How about a geopolitical events in the Middle East? Or a terrorist attack on a major oil producers facilities? How about an attack on commercial vessels in the Straits of Hormuz where 40% of the global oil transits? If you believe That is one of Those Far Fetched events, simply turn on the news and listen to the current events in the Middle East. It seems a We Are on the Brink of a major geopolitical event.
A geopolitical event or terrorist attack notwithstanding, Increased oil demand from the development of China and India Could easily drive oil prices well past $ 100 per barrel within the next year or two. The higher oil prices go, the more vital a coherent alternative energy system on a domestic and global scale would be required.
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 as well. While significant progress is taking place in these areas, it is not anywhere near satisfactory to ease concerns of the current rate of rising energy costs.
The bottom lines is this: If the substitute fuel supply, minimally on a back-up base, is not developed very soon, then the rise in energy prices, the which are surely coming Could this take the which recovery is not a recovery and turn it into a That Is depression a depression. Which Will take place first?