Like a dieter who loses a few pounds after the first week, let’s not settle back into our old habits and think we will keep it off.

Good progress has been made making the public aware of the need to reduce our dependency on oil by looking for alternative, sustainable alternatives.  Politicians talk about it, CNN reports on it, Newspapers write about it.  Now that oil prices are falling http://mygreensuit.com/2008/10/12/oil-prices-falling/ again let’s not get lazy. We need to keep the momentum going.

The current political campaign has not discussed energy alternatives very well.  There has been too much time and discussion on more drilling, clean coal and nuclear.  Hopefully, as a country that rises to challenges, that has the best workers that are innovative and creative,  we can do better. This are a sad statement to our current capabilities if we think we have to use the crutch of coal and nuclear.  Leaving this aside, and giving kudos to the millions spent by T.Boone Pickens  www.pickensplan.com , discussion of alternatives have become mainstream.

People are expecting progress.  I am expecting progress.  From venture capitalists to scientists, to the residential owners, to commuters we are all expecting the excitement to continue.  Are we so shallow that the fact that gas prices come down 25% that we will no longer look for more efficient cars?

I think things have fundamentally changed.  The fat, greedy, energy hungry American has to change.  This is a forced diet, an intervention by the globe that must continue. We have already moved towards solutions.  Automakers have adapted their designs to be more energy efficient, venture capitalists have funded billions of dollars into the green economy.  They will expect a return on their investment.  Assuming they produce good products at a reasonable price, consumers will buy them and we can ‘Keep it Green’.

Oil prices have fallen to below $80 a barrel as of Friday October 10.  The sell off has been in place for several weeks but was accelerated on Friday due to a widening economic crisis. I expect oil prices to continue to retreat, between $40 and $50 dollars by the end of the year would not surprise me.  Why ?

1.) The slowdown is real, this time.

Inventories are building at businesses, which means the consumer is not buying and businesses will then not need to buy new inventory.  Historically this statistic has been highly correlated to short term economic growth.  It has become somewhat less accurate as businesses have moved to ‘Just in Time’ inventories, but the fact that efficient businesses are left holding product does not bode well for the short term.  Expect big Christmas discounting.

2.) OPEC is hurting.  Not just OPEC countries but all propped up dictators and economies built on oil prices are feeling the global pinch.  The Russian stock market, which is built mostly on oil and natural gas prices, has fallen more than the US stock market over the last several weeks.  Hard to believe but, true.  The faster the rise, the faster the fall.  Venezuela is substantially slowing major social initiatives, due to slowing oil revenues.  The next OPEC meeting is November 18.  Expect OPEC Leaders to message that they are cutting production, lots of news conferences and statements and then return to their countries and exceed their production quotas.  They have nothing else.  They are a one trick pony and have been for almost 40 years, economies built of natural resources.  Boo Hoo, poor Vlady.  Go practice your Judo.

3.) Speculation works both ways.  The outcry from financial market geniuses that speculation drove the oil price so high in the first place, that the market does not work, should be eating their words now.  It is not a workable policy to have ‘one-sided capitalism’.  You can’t stop speculation or regulate oil prices from rising quickly and then remove those regulations to let it fall quickly.  You can’t let everyone win by letting housing prices rise quickly and then regulate and protect consumers by not letting them fall as quickly.  Either have consistent regulation on both sides, which will lead to a muted market, or allow the swings up and down.  People can benefit from swings either way.

4.) The ‘Green Economy’ will continue.  This is my hope that the progress we are starting to make will not get slowed down by a dropping oil price.  Read more about this in my next article.

Now if my retail gas price will reflect this price decrease I would be happy.  The per barrel price has fallen 46% since the peak.  I think my peak price per gallon was around $4.29 for regular grade.  I just paid $3.29 a gallon this week.  A decrease of 23%.  It would help the economy if this moved to the consumer quickly.

What we do not have is the political will. Recent cable news chatter is starting to focus on the limitations we put on oil companies to drilling off-shore, here in the US. A recent deep drill discovery off the coast of Brazil, has everyone excited and logically oil companies will use this leverage to petition politicians for the rights to do it here. At this high price we can afford to drill deeper, so why not let us do that, is the logic.

Flawed, short term thinking is what I would say. If deeper and deeper drilling becomes a profitable play now, so do alternative energies. This has long been held against new technology. Great idea but can we make money at it? The answer is yes.

Recently profitable:

http://solarenergynewsandreview.blogspot.com/2007/02/first-solar-sees-first-profit-in-20.html

Superstar performance with a 43% stock gain yesterday.

http://biz.yahoo.com/e/080508/ener10-q.html

Major gains

http://www.evergreensolar.com/app/en/investors/

It would take years and billions of dollars to build these off-shore rigs, assuming we gave away the rights to drill there. Why wouldn’t it make more sense to invest this money in renewable technologies?

Stop short term thinking, believe in ourselves and our ability to overcome challenges, believe in our technical and scientific community, and support and promote a long term solution to this current challenge.