Alternative Energy Economy Begins

Here we are in early 2008 and at the same time as the credit disaster in the US is fully developed, slashing US purchasing power as reflected by a lousy christmas for retailers, the price of oil merrily goes along close to $100 per barrel.
US oil demand is surely in decline, yet in an off season the price is steady at its high. I suspect that when the history of this period is written, that we are experiencing a significant reallocation of resources in the face of declining options.
We have had the first substancial market break, heralding the commencement of a protracted down swing in securities. The banks are writting down their capital reserves which then makes them carefull lenders. There will be plenty of good credit looking for a home over the next few years. And the Fed is scrambling to find a way to lessen the impact to provide a soft landing.
And I think that for the first time since the depression, cities are getting into the housing business. Rather scary folks, isn't it?
As I have posted earlier, oil supply has lost its elasticity. We have had forty years of convenient oil out of the middle east and have forgotten that even this fabulous resource reaches a point in which its daily production must go into decline. And today all the available evidence is saying just that. It is telling that one of the great institutuional naysayers, Cambridge Energy Research Associates, are now stating global production declines of 4.5%.
In fact we have already felt the bite of that decline and we are watching our oil stocks shrink. That is why the price is so bouyant. Remember that the price is currently twice what it was a mere year or so ago. The open question now is how long can we drag this out before aggressive rationing by both price and regulation is imposed. Obviously, George bush is hoping to tip toe out of office before this load of bricks lands on his head. My sense is that we will be seeing major high prices for oil this summer in spite of everyone's best intention. It may even develop into a crisis atmosphere, particularly if the markets respond by going into a steady decline.
Anyway, this will continue the capital movement of resources into alternative fuel strategies upon which I comment heavily.
As I have previously said, we are entering a world of $100 to $300 oil. This will make the automobile inconvenient to operate except as an occasional luxury. And every alternative becomes viable to impliment. So although there will be pain, there will also be great capital intensive transitions to be involved in.

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