The Oil Bubble Has Burst—What Now?

I think it is safe to say that the oil bubble has gone the way of the housing bubble, exploding with a loud pop. The price of oil this morning has fallen below $42, and some analysts see it falling as low as $25 next year. That is a far cry from the high price we saw not too long ago of $147. During the oil boom, everyone was focused on doing what they could to conserve oil, and alternative energy investments were the rage. Oil companies were vilified and at the same time oil workers and oil dependant economies were rolling in cash. We have seen oil booms and busts before, but we kept hearing arguments that this boom was different: This one would never end because there just wasn’t enough supply. In the long run we will surely succumb to supply issues, but for now the world is flush with oil and the boom is over. What does this mean, though?

What this likely means is that Americans will once again return to their old ways. That means that instead of fighting over hybrid cars, people will once again buy SUVs. Instead of doing what we can to conserve energy, we will revert to our wasteful ways. As for the government, there was a lot of talk about new alternative energy projects, and how we wanted to eliminate our dependence on foreign oil. However, with oil prices in check you can bet that the government is going to be much more concerned with the financial crisis on hand rather than starting alternative energy projects that won’t offer returns for several years.

The reason why we continue to see these oil booms and busts is because each time they come around we fail to adequately prepare. During the boom we talk about all the wonderful things we are going to do to prevent this from happening again, but then once the boom ends we fail to start or finish the projects that will actually solve the problem. Obama seems intent to follow through on the alternative energy plans he so heavily promoted during his campaign, but I have a feeling that his priorities once he takes office will reflect other, more immediate needs.

That means that this won’t be the last oil boom and bust cycle, and one thing is certain: The next time around is going to be even worse than this one. Each time we fail to solve the problem, the cycle becomes more painful. In the meantime investors might want to think twice before investing in those alternative energy projects and companies that they are hoping Obama will give a boost to. Real estate investors might also want to rethink investing in oil dependant economies. As existing contracts run out, and oil companies cut back on new projects, these economies are going to feel the pinch. Many of these areas look great on paper, because they seemingly have avoided the real estate bubble, but now that the oil bubble has popped, so too will these local real estate markets.

Paris Hilton For President: Energy Policy For People (magazine)

Paris Hilton has recently released a video rebuttal to a rather ill-advised John McCain ad which compares Barack Obama with “celebrities” such as Hilton and Britney Spears, suggesting a lack of substance despite their charisma. The original ad seems desperate and is as insulting to the viewer as it is to those mentioned. Meanwhile, Paris’ ad is actually witty, albeit a touch misinformed about energy policy.

Who would have thought that perennial tabloid darling Paris Hilton could actually deliver a speech more effectively and with greater poise than our president of eight years? It seemed, in fact, that her relevance was beginning to fade until the McCain ad was released. While I doubt that Ms. Hilton will win a single state in November, this may have the unfortunate side-effect of reinvigorating the public’s fascination with her. Thanks, John; I guess we’ll always have Paris. Still, we could do worse than President Hilton: I dare say that she would have looked as convincing as Bush did arriving in a flight suit on the USS Lincoln to announce “Mission Totally Accomplished! Luvz it!” She might even be able to pronounce Sarkozy properly.

But my praise of Ms. Hilton stops there. In the video, she suggests combining the two energy policies of McCain and Obama to help solve the energy crisis. Her suggestion is to allow offshore drilling to tap those rich deposits for cheap, easy fuel as we work on alternatives. Appropriately enough, the last time I used the words “rich,” “cheap” and “easy” in the same sentence, it was to describe Paris Hilton, but unfortunately her plan is as superficial as her cult, and it is flawed for the same reason that McCain’s “solution” is flawed.

Offshore drilling would be a placebo for the problem at best, as the restricted areas would provide only a drop in the proverbial barrel of our oil consumption. Furthermore, it will take several years to construct derricks and refine the crude, providing no immediate relief and precious little when the wells truly begin to produce. All of this assumes that the oil would be sold exclusively to Americans, and we should know by now that this is not a given.

The Paris for President campaign is off to a rocky, though amusing start. I’m afraid she won’t have time to really establish a solid platform by November. That said, I think her decision to start this late in the campaign is a refreshing one. This overextended campaign season has been costly and grueling for everyone involved, and though I can’t get behind Hilton on her energy policy, her frank approach is a balm in this hostile election year. She even may have a running mate selected before the Republicans or the Democrats. She mentions Rihanna, but a ‘Hilton Clinton’ ticket has such assonant appeal, and it’s better to be called assonant than asinine, which is how I would describe the campaigns of other nominees at this point.

Luvz it, indeed.

Global Warming Plan Of Action Created: Now We Just Need $45 Trillion

The International Energy Agency (IEA) has created a comprehensive plan on how the world should combat global warming. The price tag? $45 trillion. Essentially the goal of the IEA is to have the world cut greenhouse gas emissions by half by 2050. Their plan to accomplish this feat, among other things, includes the creation of 1,400 nuclear power plants and approximately 700,000 new wind turbines, according to the Associated Press. The catch--beyond the price tag, that is--is that we can’t wait to act. All of these things take time to build and the longer we wait, the worse things will get and the higher our chances of a cataclysmic environmental disaster.

When I read this report I thought it sounded like a good and fairly reasonable solution. After all, the IEA is only trying to spur action, and in order to do so, wanted to prove that it could be done. Are there other ways to accomplish the same end? Of course, but now we can physically see at least one of these ways. Since the report projects 40-plus years out and only uses technology available to us today, there will certainly be adjustments made, but it acts as a great starting block.

I’m not a scientist by any right, and I can’t even opine on whether or not global warming is real. But what I can see is that there are without a doubt changes going on in our environment, things that don’t make sense to me. I don’t know if these changes are natural, or if they are being caused by humans, but I can see they are causing damage. At the end of the day I know for a fact that pollution is harmful to humans and animals; whether or not it has anything at all to do with global warming is a separate issue. So in my mind I feel like we are better off assuming that global warming is being caused by humans and working towards reducing harmful pollutants. Worst case, if in 100 years we find out that global warming was a natural occurrence, so be it; at least we made the earth a cleaner and healthier place to live. But on the flip side, what if global warming is caused by humans? If we fail to take action now it will soon be too late, and then not only do we still have all the harmful pollutants, but we also are going to have to deal with a bunch of new environmental problems. We are talking rising oceans, the extinction of numerous species (in fact, just today it was announced that the Caribbean monk seal is extinct) and so on.

My investment philosophy has always been to plan for the worst and hope to be pleasantly surprised. When I look to buy a property I take the worst case projections, and if the numbers still work, I do the deal; if not, I walk. I would much rather be pleasantly surprised (which I typically am) than be overly optimistic going in and end up with a money-sucker. I think the same philosophy can be used in regard to this issue as well. The worst case scenario if we fail to act is much worse than the worst case scenario if we act but are proven wrong. The difference is so incredibly skewed toward the one side that it seems like this decision should be a no brainer. So what’s the hold-up?

Ultimately, as you probably guessed, the hold-up revolves around money. Any action we take to attack global warming is going to come at the expense not only of governments and taxpayers, but of big fossil fuel businesses. The last thing these businesses want is added expenses for the clean-up of their pollution, or loss in revenue because people are using other energy sources. It is bad for their business, and since they have money, they also have a lot of clout with politicians. They are going to hire scientists to disprove the global warming theory, and they are going to talk about how many jobs would be lost and how the economy would suffer. In addition, another of the big hold-ups is with developing countries such as China, which rely heavily on fossil fuel to power their economic growth. In their mind it isn’t fair that the U.S. got to enjoy the economic benefits of growth spawned by fossil fuel usage while they don’t get the same opportunity.

There is certainly some weight to the economic argument, however, they are likely forgetting the fact that many jobs in the fossil fuel industry would be replaced by new jobs in the alternative fuel industry. Instead of working at the coal power plant, now workers will have to be trained to work at the nuclear power plant, and so on. Sure, in the end some jobs will probably be lost, but better a few jobs lost than a world ruined by the effects of global warming.

In response to the developing country dilemma, this one is much harder, as these countries certainly have a case to be made. In my mind, the developed countries who contributed the most to the problem should have to compensate for that. So the U.S., for example, should have to pay a large portion of China’s expenses to combat global warming and help pay for new alternative energy sources or the cleaning up of their coal power plants and so on.

What does this mean for investors? Well, if the world starts getting behind the IEA’s plan, or some similar one, there is going to be a huge surge in the alternative energy industry. 1,400 new nuclear power plants and 700,000 new wind turbines is a huge number by any stretch and since there are only so many companies that can make these things you can bet they are going to be extremely busy.

Alternative Energy Sources From Unlikely And Surprisingly Pungent Places

With ever rising oil prices alternative energy has not only gained national attention, but has also been coming from increasingly unlikely, and often rather pungent, sources.

Late last month there was an article published by the Associated Press about the recent steep increase in reported theft of used cooking oil.The skyrocketing price of petroleum has apparently pushed the demand for refuse cooking oil so high that many legitimate purveyors of the putrid yellowish sludge, which is generally kept in large barrels behind fast food restaurants, have found their sources to be completely depleted. Grease collectors have reported losses of several thousand dollars in individual locations, stolen in the night by (what I assume to be) rapier wielding grease pirates.

Cooking oil, which can be distilled into a form of biodiesel to power converted diesel vehicles, has become a multimillion dollar industry in recent years. Production has increased from 75 million gallons in 2005 to nearly 500 million gallons last year. Rising gasoline prices and general concern about global warming have stimulated the growth of the industry, which requires a permit from the EPA to legally produce the fuel. As a result, many biodiesel users still choose to illegally distill their own biodiesel with stolen grease in backyard sills.While this "problem" has supposedly gotten out of hand in areas such as Seattle, which reportedly loses 30,000 gallons a month of grease to oil bandits, the increase in production shows that there is a major demand for energy derived from human created waste (I personally am still holding out to power my Delorean with a trash fueled “Mr. Fusion.”).

The use of biodiesel produced from food waste is often considered to be a more environmentally friendly alternative to the fossil fuel intensive and food-riot inducing ethanol, which is commonly derived directly from crops such as corn. In both cases, the combustion of biofuel does not directly contribute to climate change, as the carbon released does not come directly from fossil fuel sources. Unfortunately neither option provides a long-term solution to the current energy crisis as potential sources for biofuel (especially waste derived biodiesel) will never come close to meeting the vast demand for fuel in the United States.

So now that you have donned your eye patch, gone dumpster-diving for cooking grease, and are gleefully puttering around town in a Volkswagen that smells of burnt French fries, you may be asking yourself, “this is all good, but is there any way that I can possibly obtain electricity for my home in a way that is both environmentally friendly, and comes from a waste source even more pungent than using fermented cooking grease to fuel my car?” Fortunately for you there is such a thing: methane gas derived from anaerobic digesters.

Anaerobic digesters produce methane gas through the breakdown of organic materials by anaerobic bacteria, which essentially entails collecting the gaseous waste byproduct of hungry bacteria. If this concept alone isn’t gross enough for you, consider the fact that one of the most common "foods" for these bacteria happens to be cow manure. That’s right, anaerobic digesters operate by collecting large amounts of manure in an oxygen free environment, collecting the resulting methane gas and using this to power natural gas generators. Having visited a digester myself, I can personally attest that there is absolutely nothing glamorous about it.

Like biodiesel, anaerobic digesters may not provide the perfect solution to ending our dependence on petroleum, yet remains an interesting option for using waste as a fuel source. So far digesters have been primarily implemented on dairy and cattle farms, in projects such as Vermont’s Cow Power program. While they often do not produce enough electricity to completely cover the electrical needs of a running farm, anaerobic digesters do greatly help to offset a farms load on the electrical grid. Collecting and combusting methane gas also has other benefits, including decreasing the potent greenhouse gas effects of methane gas on its own.

With the end of the age of cheap petroleum upon us, alternative energy sources are becoming increasingly favorable options. Utilizing waste products to provide environmentally friendly energy is especially appealing as it utilizes a vast reserve of untapped resources that would otherwise be unused, as well as helps to reduce to potential impacts of fossil fuels on global climate change (which, if it wasn’t scary enough already, is apparently leading to an epic "cold war" showdown between Canada, Russia, Denmark, Norway and the United States over the rights to a newly melted northwest passage through the arctic… I’ve been watching the ice battle in "The Empire Strikes Back” in eager anticipation). We can only hope that the current spike in demand for biodiesel, and technology such as the anaerobic digester (which theoretically can create methane gas from other organic waste byproducts aside from just cow manure), will help to fuel investment and innovation in the field of renewable alternative waste based energy.

This was a guest post from Patrick Woolford. If you want to read more from Patrick he also blogs about Panama Real Estate.

Homemade Ethanol: The Future Or Waste Of Money?

Efuel Corporation could not have picked a better time to unveil their state-of-the art home ethanol distillery. Despite its $10,000 ask price, the EFuel100 MicroFueler is a remarkable product that might provide Americans with a glimmer of hope. The device can produce up to 35 gallons of ethanol from a combination of sugar, yeast and water that can be pumped directly into your vehicle.

The process is as easy as “third grade science,” according to CEO and founder Tom Quinn. The feedstock, which consists of sugar and yeast, is loaded into the machine, which then mixes it with water and uses a membrane system to turn the ingredients into ethanol in about a week. The device uses a standard household 110 to 220 volt AC power supply and consumes about 150 watts.

But is the EFuel100 practical? It takes 14 pounds of feedstock to produce a gallon of ethanol. If you were to use EFuel’s Carbon Credit Coupon Program, you could buy discounted EFuel certified sugar feedback for 15 to 30 cents per pound which would cost $2.10 to $4.20 per gallon by my calculation, not including electricity costs.

Most cars are capable of running on ethanol as long as they are equipped with a converter kit. This isn’t necessary for some of the new flex cars, but traditional cars will likely need to have the converter kit installed, which costs around $700.

There is also a $1,000 federal tax credit available, which will help offset some of the initial $10,000 investment. While I think it is more economical than a $100,000 Tesla electric roadster, most people are still probably better off with a good hybrid.

While promising as an alternative fuel source, there are several issues with the Efuel100. Food and electricity prices have been skyrocketing right along with oil, so the cost of fuel for the Efuel100 keeps going up. It may not scale since it requires loads of sugar to operate, and most people don’t have room in their homes for hundreds of pounds of sugar. Worst of all, a study by Stanford University professor Mark Jacobson found ethanol is no better for air quality because it releases formaldehyde and acetaldehyde into the atmosphere, which can be harmful to humans. Then of course there is the initial $10,000 investment. Because the savings on over gas is pretty minimal it would take a long time for someone to recoup that initial investment.

Despite the drawbacks, I like the idea of fighting the profiteering oil companies by creating my own fuel. If you have an extra $10,000 lying around, and loads of extra storage space, why not be an early adopter and help fuel demand for alternative fuel sources? If this product does well, it will lead to companies creating even better fuel devices, which in the end should help everyone.

This was a guest post by Charles Sipe. If you want to read more from him visit his blog.