Wednesday, December 10, 2008

The Future of Energy

Something that has always interested me is looking at the history of vital commodities and how their market values go through tremendous upheavals. An example might be whale oil – once a staple, but now useless. Or yellowcake, which is concentrated uranium that was once totally valueless but is now highly prized for its use in nuclear weapons and reactors.

Other examples include spices – for which people used to kill each other, but are now located on the McCormick rack at Wal-Mart – or items such as furs, crops, various animals, stones, and wood. If you use a century as your measuring stick, commodities (and virtually all assets) undergo seismic shifts in economic value.

Strangely, people do not seem to view energy resources in the same manner. Since energy is such a critical component of our daily lives, even minor fluctuations in price, in percentage terms, are of massive significance to individuals and the economy.

Over the next decade or two, if truly we are in a "Peak Oil" scenario, what says the gasoline price can't increase by a factor of, say, ten? Looking at virtually any other commodity, this is a very modest secular shift.

But for American-made SUVs – once the automakers' profit center – it means that the gas tank which now takes $70 to fill will cost $700 in the future. Clearly, gasoline-powered cars and trucks as we know them would no longer be viable. Oil at several-hundred-dollars per barrel would cripple entire industries.

Was the boom in crude and other commodities from 2002 to 2008 the harbinger of a new era of scarcity? Or will alternative energies become the new prize, leaving oil as a relic of the Industrial Age?

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This work by Nicholas E. Radice is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.