Energy

Oil and natural gas have had a good start to the year.  Part of the reason was an early winter filled with above normal snow and bitterly cold weather.  It has made no difference to the reserves of both.  Both have record reserves and it will remain so for years to come. 

Solar and wind power will grow, but their competition will be coal.  China and the U.S. each have 400 years worth of reserves.  There is no way this resource will be abandoned simply because the Greens tell us to. Coal will continue to be the cheapest form of energy for the next century, and pockets do the talking.  India, Germany, Russia and most of Asia will continue to burn coal. 

The second cheapest and most abundant source of energy is natural gas.   Like coal, it has hundreds of years’ worth of supply.  Qatar has one field alone that is estimated to have 400 years worth that has yet to be developed.  Their field being developed today has around 300 years’ worth.

Solar power should be the cheapest form of energy but it appears it may never be.  Recently I was in the Cook Islands.  The country has spent the past couple of years building solar farms. Yet, the cost of the energy is very high.  Some hotels charge $30 a night for air conditioning.  Solar power there, which should be cheap given the amount of sun they receive, is not price competitive with diesel power.  Most South Pacific Islands use diesel as their major source of power.  Rottenest Island, located off the coast from Perth, is the only island which has wind power that I have seen.

The world is stuck with oil and will be until the day it is depleted.  This could take place in 100 years.  By the mid 2020’s we will start to see reserves decline, like what is taking place today in the North Sea.   We predict by 2050 there will be a severe shortage of oil.  Demand will continue to grow as we will need the resource for medicines, jet fuel, fertilizes, plastics and so on.  

Since the world is in a financial bubble we can expect the economy to slow.  Oil prices could fall back to the low forties, but it will be the low for the rest of this decade.  Thereafter it will be on a steady increase, probably in the hundred dollar range by the middle of this century.

Natural gas will remain flat for the next century, bouncing between $2.50 and $3.20.  There is not one reason for gas prices to soar back above $10 like it was for a short period last decade.  Supply is so great that if the world decided to develop all the gas fields the price would collapse to under $1.