Survey: Oil may lose top rank as cheapest energy

[Guest guest]

For all you investors out there, this is why investing in energy can

be profitable.

Whenever there is a demand for a certain kind of energy, its price

goes up.

" Switch to natural gas! It's cheaper! " we hear, and so we do it, with

the result being that now there is a higher demand for it, and so the

price of natural gas goes up. But as a mutual fund holder that would

be invested in a plethera of energy companies, you stand to gain

every time, because if oil falls off in price, your fund manager

sells of shares in that and then buys more in natural gas.

The fact is, it does not matter what your source of energy is, even

if it is " green. " It will always be expensive at the start, then it

will dip for a while, and then go up.

Take windmills as an example. If you are a single land owner, you

might buy and install one, and the technology has only recently made

them affordable. But then once you have it, your energy is free

except for maintanence, and you can sell off excess energy. If you

play your cards right, maybe the wind company installs it for free in

return for the right to remove it whenver they want and to get a good

cut of that excess energy sale.

If you live in a municipality that gets its energy from a windfarm,

then you pay for the energy in many different ways and in similar

dips and hills. The energy company is going to want to pay for those

windmills in addition for the lines to send the electricity over and

their maintanence, and they will charge for the energy as well.

Once a lot of the overhead is paid for, they may cut rates to try to

get adjacent communities to part with their own windmill companies

who are newer and still charging higher rates.

And then, when the coal fired electrical plant gets closed and torn

down, the windmill plant has a monopoly and jacks up prices again.

Further, as word of this marvelous technology has been spreading, new

municipalities have been buying windmills or calling for installation

of new generating plants nearby, and so the orders for new windmills

abound, and thus the cost of windmills goes through the roof. So now

overhead increases, and the new folks get charged higher rates. The

monopoly on the windmills that are already paid for jack up their

rates too so as not to cause feuding over rates.

But wait! No one is using coal anymore! And there's tons of it lying

around and waiting to be mined. Why not repair some old plants and

buy this cheap fuel?

You see how this works?

Administrator

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Survey: Oil may lose top rank as cheapest energy

By JOHN PORRETTO, AP Energy Writer Porretto, Ap Energy Writer –

Wed Dec 10, 1:18 pm ET

THE WOODLANDS, Texas – Over the next 20 years or so, oil and natural

gas will lose top ranking as the world's most affordable energy

sources, according to a survey of energy executives released

Wednesday.

Deeper wells in more inhospitable places, both political and

geological, have altered presumptions of doing business in the oil

patch.

Nearly three out of four executives and managers surveyed last month

by Deloitte LLP said oil and gas are the cheapest available energy

sources for now, though only 23 percent believe that will be the case

in 25 years.

Deloitte, which conducted the wide-ranging survey of 52 industry

professionals via telephone, released the results Wednesday at its

annual oil and gas conference in suburban Houston. Most of the

executives work for companies with annual revenues of more than $100

million.

The sampling revealed a growing concern about the sustainability of

oil and natural gas in the coming years. Future sources of fossil

fuels, the cost of producing them and the price consumers will pay

are some of the biggest uncertainties facing the industry.

" Clearly, the oil and gas professionals involved in our survey are

starting to think about the nation's transition to renewable energy

and other alternative fuels, " said , vice chairman of

Deloitte's oil and gas practice.

Last week Exxon Mobil Corp., the world's largest publicly traded oil

company, expanded its energy outlook to include a new section on the

development of all " viable " forms of energy and public policy on

climate risk.

Exxon has steadfastly maintained that it is an integrated oil

company, however, and that fossil fuels will provide 80 percent of

all global energy needs through 2030.

The ongoing global economic malaise and its effect on crude demand in

the next couple of years was a hot topic at the conference.

Adam Sieminski, an energy economist at Deutsche Bank, painted a bleak

picture, saying global oil demand could fall by 700,000 or 800,000

barrels a day in 2009, a steeper decline than many other forecasts.

The U.S. Energy Information Administration said Tuesday it expects

global oil consumption to decline by 450,000 barrels a day next year,

down from a November forecast of flat demand. Total world consumption

is between 85 million and 86 million barrels a day, according to the

EIA.

" Not only could we lose 700,000 or 800,000 barrels a day next year,

but very possibly it could be twice that number, " Sieminski said

during a presentation.

He said crude could fall as low as $30 a barrel in the near term, but

only because of the recession.

" Once the global economy recovers, I think you need a price somewhere

in the $75, $80, $85 range in order to get the investment required to

sustain production, " Sieminski said.

Of the executives interviewed by Deloitte, 53 percent said they think

the U.S. could run out of reasonably priced oil within the next

quarter century, and 56 percent said the world is likely to face the

same scenario in the next 50 years.

Few question that fossil fuels will be a vital energy source

worldwide for many years. And the world's biggest oil and gas

companies continue to spend far more trying to find new sources of

oil and gas than they do on alternatives such as solar and wind.

Just last month, the International Energy Agency said more than a

trillion dollars in annual investments to find new fossil fuels will

be needed for the next two decades to avoid an energy crisis that

could choke the global economy.

The Paris-based agency stressed it's essential for the world's energy

companies to continue investing in new projects despite crude prices

that have tumbled 70 percent since hitting a record high in July.

Slightly more than 40 percent who took part in the Deloitte sampling

said the U.S. energy situation is better today than it was five years

ago, while 50 percent said it was worse. Six percent weren't sure.

Three out of four said shifting away from the nation's reliance on

fossil fuels for transportation needs is an appropriate goal for the

country, yet most think the best alternative right now is natural

gas. About 30 percent said electric plug-in vehicles are the most

promising alternative.

Among the survey's other findings, 42 percent of respondents cited

government regulation as the most significant deterrent to investing

more in exploration and production. About 30 percent said it was

geopolitical risks and 12 percent cited commodity price volatility.