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Dire Warnings of Oil Price Spike: Best Argument for Alternatives Yet

| Wednesday November 12th, 2008 | 0 Comments

feasta-gaspump.gifIt’s all over the news today: the International Energy Agency is warning that another spike in oil and gas prices is impending. The recent sharp drop in crude oil prices – thanks largely to purging of speculative demand for paper, exchange-traded oil contracts from hedge funds such as T. Boone Pickens’ BP Capital– is leading the world’s major oil and gas producers and refiners to cut back, if not zero out, their capital expenditure plans.
It seems that even the most flush, reserve-rich oil producers aren’t willing to invest in new exploration, production and refining at current prices, prices that are still 33% or more higher than they were before the liquidity-fed speculative bubble began shifting into oil and commodities several years ago. The effects of the banking and credit crisis is rippling through and resulting in recession, and prompting major oil and gas companies to drastically revise their capital spending plans downward. This as best revised forecasts are that energy demand will grow 1.6% per annum between 2006 and 2030.
If that’s not a strong argument for investing as much as possible now in the development of alternative, renewable energy resources I don’t know what is. If Saudi Arabia is having trouble meeting its recently upgraded capital spending plans, can we expect that drilling and producing here in the US is going to yield even a small percentage as much oil, or as cheaply. Clearly not.
It looks like there’s going to be short-term pain across the energy sector – from the pump to the plug – in the short-term. “Drill, baby drill,” is no solution. It takes years to locate and bring oil and gas resources into production, just tightens the ties that bind our energy and economic system, as well as foreign policy, to foreign oil and gas. That means our military personnel and arms will continue to our biggest export as we will have to continue to send them abroad to defend our energy exporting allies and intercede in local conflicts and politics.
Add to that the very real and enormous costs and risks of climate change and environmental degradation and it seems clear that we’re behind the curve when it comes to developing renewable energy resources and upgrading power infrastructure, fuel distribution networks and fleets of low carbon or emissions free vehicles, as well as a new generation of rail and other mass transportation networks. And of course, that’s not to mention the benefits to national security, as well as savings in lives and financial cost, reduced military involvement in the Middle East, eastern Europe and Eurasia could yield.


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