The world turns green
With the demand for oil dropping and Obama's commitment to green energy being pushed to the fore, green technologies look to make good investments
The need for oil fell in 2008 and demand is almost certain to continue to wane far into 2009. Prices fell as low as $35 a barrel last week as the global economy shrunk further into decline. If the world has changed since July when the barrel price hit $147, the chances of oil prices reaching such peaks again look remote. But it’s about more than global recession and America, where users consume up 25 percent of the world’s oil.
Changes planned by President Obama could have long term ramifications not just on less demand for oil, but for food prices too.
The IEA has predicted that global oil demand will fall in 2009 for the second year in succession. There has not been a consecutive annual decline for 26 years.
Obama’s alternative ‘energy plans’ are the key to where oil prices may be headed.
He aims to double the output of alternative energy over the next three years with the full support from the IEA.
“It is very ambitious, but he certainly can do that,” said executive director Nobuo Tanaka, last Friday as he welcomed “the very strong initiatives of the US administration towards decarbonising the power sector”. Speaking at a climate change meeting in Toyko, Mr Tanaka offered strong support for Obama’s stimulus package to invest $150bn over 10 years on low-carbon energy sources. The plan aims to create five million jobs. More importantly the Obama regime wants to create a partnership of oil-importing nations (to include India and China) that will share new processes and ideas with the aim of eliminating dependence on fossil fuel. If he pulls it off, this vast project is likely to see rapid advance in the development of biofuels, battery, solar and wind technology.
OPEC has announced a record cut in production to prevent prices falling any further beyond the point at which profits are almost entirely diminished. Saudi Arabia has stated that a reasonable price is nearer to $75 a barrel.
Over the coming months more than 35 percent of the Kingdom’s oil production capacity will remain dormant, a position estimated to be costing more than $15m per day. Mexico, the world’s sixth largest producer, saw a nine percent annual drop in output, the largest reduction in more than 50 years.
While low oil prices are expected to reduce the threat of the high food costs witnessed around the world in the first part of 2008, America’s push to undermine reliance on fossil fuel is almost certain to impact the price of agricultural land.
This factor has already started to feature on values. If traditional real estate investment remains in the doldrums, agricultural land is going in the opposite direction.
Wheat futures on the international markets have moved up by about £30 per tonne to £125 per tonne for November 2009.
An alliance of organisations published an open letter on Thursday, January 15, in America and internationally, warning of the dangers of industrially produced biofuels. The letter explains why large-scale industrial production of transport fuels and other energy from plants and crops could be bad news for consumers. The world is changing fast. Stay out of oil and buy into the new technologies.
Land, as ever, remains a good option.
