Thursday, June 14, 2007

Ending the Oil Era

Interview with James Woolsey.

"If you remember, we got interested in alternative fuel firms like the Synfuels Corporation in the late seventies and then in 1985, the Saudi’s dropped the oil down to $5 a barrel and bankrupted the Synfuels Corporation. The good news is that they bankrupted the Soviet Union, too, but they certainly undercut alternative fuel efforts. People got interested in alternative fuels again in the early nineties, then in the late nineties, oil dropped down to $10 a barrel and people lost interest, again. One of the things that we have to do is make sure that this rollercoaster effect can’t happen again.

Some people think it will be much more difficult in the future because the Saudi Arabian oil fields could be peaking, if not now then soon. We will also have huge demand, not only from the West but from India and China as they start to produce middle classes that drive cars. So the Saudis might not be able to drop the price to five or ten dollars a barrel by turning on their excess capacity, but they might be able to drop it to $20 per barrel. Most of the better of these alternative fuels are only really viable, (as far as we can see) if oil is say $35 per barrel or more. The one that’s viable even below that is electricity, because off peak, overnight electricity in many parts of the United States sells for between two to four cents per kilowatt hour. That is the equivalent to about a penny a mile driving where as gasoline is in the range of ten to 20 cents a mile at today's price. However much the Saudis might be able to drop the price of oil by turning on excess capacity, I doubt if they would be able to undercut off peak electricity in price."

From "The Futurist"

HT: Peak Energy Blog