There is fresh, new evidence that energy may have turned a corner within the past few months. As oil companies reported their 2007 results, and while the spotlight was on record profits, other, more interesting, results were below the surface.
First, many reported production increases on a year-on-year basis for the first time in a few years. It seems as if oil has been hovering close to $100/bbl forever, but in reality, only a year ago prices were closer to $50, and the average price for 2007 was about $70. As a consequence, these are the first results that reflect anything approaching the recent price.
Interestingly, many companies did not see record earnings, for the second year in a row, as a result of operating problems, rising costs and gasoline and natural gas prices that have not risen to match the price of oil. This is causing a somewhat ironic hunt for cost savings while admitting for the first time that somewhat higher prices are here to stay. The BP CEO is quoted as saying prices above $60/bbl are probably here to stay, in contrast to previous forecasts of much lower prices, which led to more conservativism in investments. Meanwhile, facilities are stretched to the limit as a result of decisions made in an environment of much lower prices just a few years ago.
And, alternative energy investments have skyrocketed. Solar Photovoltaic IPOs have skyrocketed, and the price of the resulting new companies has skyrocketed as well. (I wouldn't touch them with a 10 foot pole at current valuations, but that is another story. It reflects the public perception that higher prices and global warming issues are here to stay, and there is money to be made in alternative energy.) Even the major energy companies are increasingly jumping into the fray. Many are investing heavily in both solar and wind. BP, for example, just announced another 150 MegaWatt wind plant in west Texas. And, they have a large and rapidly growing investment in the manufacture of solar cells. I'm even starting to see solar hot water and heat being mentioned more frequently.
Meanwhile, the higher prices seem to be beginning to have a significant effect on demand. The world economy is slowing and suddenly conservation is sexy (Not as sexy as alternative energy, but the more practical solutions never seem quite as exotic as the new and exciting.).
All this means to me that energy has turned the corner. Oil and gas are squeezing their last increases in production from the recently high prices. Research into alternatives is at a fever pitch. Alternative technologies are appearing regularly on the front pages. Money is flowing to every alternative with reasonable potential, and is beginning to have a significant impact.
These same high prices are beginning to damp demand. Small cars are in, big SUVs are out. Just yesterday a friend was touting the gas mileage of his new Cadillac crossover. Insulation and more efficient appliances and systems are in. Even the dream home is becoming a bit smaller.
Time will tell, and I'll admit I've thought we might have arrived here before. But now, the signs are becoming clearer. Peak oil is near, and the world has accepted it, starting the path toward a post peak-oil future.