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/2008/12/11/9501508_Energy_Message_for_Investors/
You are here:
PureEnergySystems.com > News > December 11, 2008

Energy Message for Investors

With oil prices headed for a $1.00/gallon on gasoline and possibly below, investors might think that alternative energy investments are a sucker bet. Rest assured nothing could be farther from the truth.

by Paul Noel
Pure Energy Systems News


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It is a reality. With oil prices headed for a $1.00/gallon on gasoline and possibly below, investors might think that alternative energy investments are a sucker bet. Rest assured nothing could be farther from the truth. The dropping energy prices will be followed by a serious run up in costs when economic conditions recover. Now is the time to buy into alternative energy.

Its cheap right now. The capital costs of developing alternative energy are all lock step attached to the price of oil. The oil is cheap and the metals, glass, electronics etc are cheap now too. 

What you can rely on most of all is that the energy your technology generates will not increase in cost when oil takes off again. When the herd goes out buying oil at any price, your investment will pay off to the limit. Your costs will not be tied to oil's next run up. They will be tied to its last drop.

It was always a myth that there was a "high" target price where alternatives will pay off. I remember those discussions of how high priced oil would make the price of ethanol pay off if oil hit some $100/barrel. Then funny things happened and the costs of ethanol development kept rising and it never really paid off even at the higher levels. All that happened was grain bought at the lower level paid off against the higher level. When grain went up the payoff missed.

Never buy alternative energy on some mythical target oil price trigger. If alternative energy pays off, buy it. It will in time separate in the market from oil in its sourcing prices. The reason it is locked to oil now, is that all energy used to buy it now and build it now comes from oil. As energy becomes alternative sourced, the relationship to oil will dissipate. Until then it remains locked to oil and it really doesn't matter when you buy based on oil prices. 

Alternative energy will be the energy cranking when the ships are stopped by pirates. Alternative energy will be the energy keeping American running when war blows up the oil wells in the Middle East. Alternative energy will be for sale and reliable for America when other sources are gone. Alternative energy is an investment in the future.

If you are an investor, you have the following choices. You can sink your money into Americans and live with the Americans who are peaceful and kind, or you can pour your money into the children of the Middle East etc., who hate you and are planning to kill you. This is your choice, bet on your own family or bet on enemies at the gate. 

I do not suggest you invest your money carelessly or without careful consideration that it will earn. Do not invest in projects unless you feel sure they will likely pay off. Obviously some alternative energy projects are prospective and risky. Some require more R&D. Those you must consider carefully and some deserve your funding. The payoff will be higher with higher risk but with risk some will lose. 

But rest assured, investment in alternative energy is warranted right now. Do not let your fear stop you now. Your country and your family need your confidence.

Here are areas sure to pay off right now.
(1) Energy Conservation Technologies. Things which reduce continuing use of energy.
(2) Solar and Wind Energy. Today these are foolishly cheap.
(3) Geothermal, Tidal and similar Energy.

More risky are new power sources, some of which appear poised to make entry into the market. 

It is best to consider a termite. the little bug is quiet and does his work in the shadows. He gets more houses than all earthquakes, fires, floods and windstorms combined. Invest this way.

# # #

Feedback

Factors to Prevent Prices from Dropping Much More

On Dec. 6, 2008, New Energy Congress member, Jim Hughes wrote:

A number of factors will soon start to kick in to stop oil prices from going much lower than the recent high-$40 level, including: 

  1. Enhanced Oil Recovery (EOR) operators will begin to shut down production since the enhanced recovery methods entail higher costs. They know they can only produce EOR oil for a limited time and in a fixed quantity. At a low enough price of oil they will deem their profit margins to be insufficient. Some operators will shut down because they can’t afford to operate but most will ask: why sell it for $50 when we are confident oil will eventually sell for a much higher price and we will only have a fixed amount from any given field to sell? 

  2. At some price some Canadian and Venezuelan oil sands operators will find their marginal costs for production, shipping, and marketing is greater than the price of oil and so will have to shut down operations. That floor price may not be too much lower than the present $48.

  3. The rapid decline of old cheap-oil fields will reduce supply even more than OPEC will. Recently the IEA reported that old fields are starting to decline at rates of 6.5%, much more rapidly than the 4% that has been standard wisdom previously. Even a 4% decline rate means you have to bring on about 3.5 mb/d of new oil fields each year to make up for it. So the accelerating decline of old fields will have more impact on supply now when there is less supply and when there are fewer new fields coming on stream.

At some point, the market forces unleashed by lower prices - in other words the tendency of suppliers to produce less oil when prices are lower - combined with the natural decline of old oil fields will offset the forces pushing oil prices down, namely decreasing global GDP and the expectations for still lower prices on the part of speculators. As usual, “the cure for low prices is low prices.” 

* * * *

Price Markup?

On Dec. 6, 2008, New Energy Congress member, Robert Pritchett wrote:

I heard yesterday that the profits stay the same, whether the petro-oil is sold at $200 a barrel or $30 a barrel - 8 cents on the dollar. The cost variation per barrel is by the speculators. 

Last I checked, the cost for pumping a barrel out of the ground in Alaska was $14 and $16 on the east side of the Rockies.

So tying alternative fuel ROI to petro-dollars indeed does not make a whole lot of cents (pun intended).

* * * *

Factors to Prevent Prices from Dropping Much More

On Dec. 6, 2008, New Energy Congress member, Jim Hughes wrote:

10-30-2008...Exxon Mobil (XOM, Fortune 500), the leading U.S. oil company, said its third-quarter net profit was $14.83 billion, or $2.86 per share, up from $9.41 billion, or $1.70, a year earlier. That profit included $1.45 billion in special items.

The company's prior record was $11.68 billion in the second quarter of 2008

The company's earnings were buoyed by oil prices, which reached record highs in the quarter before declining. Oil prices were trading at $140.97 a barrel at the beginning of the third quarter, and had fallen to $100.64 at the end.

Compare that to 2007, when prices traded at $71.09 a barrel at the beginning of the third quarter, and rose to $81.66 by the end.


Related stories

  • Peak Oil >
    Gasoline’s Cheap Again, But Peak Oil Still Looms Large - Given the news from the past few months, it borders on the foolhardy to preach about the looming dangers of peak oil. Doing so seems a bit like warning about the possibility of drought while standing without an umbrella in the midst of a torrential downpour. (Energy Tribune; Nov. 26, 2008)
  • Fuelwatch Worldwide >
    Return to $1 gas? Energy prices evaporate - Oil prices hit four-year lows as employers cut the highest number of jobs in 34 years. The continuing decline in prices is so dramatic and so sudden that it is raising the prospect that gas prices could soon fall below $1 a gallon. Note: It already has in Australia. (MSNBC; Dec. 5, 2008)

See also

Page composed by Sterling D. Allan Dec. 11, 2008
Last updated December 24, 2014

 

 
 

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