The strongest advocates of renewable energy do seem to have one common, unstated theme in their arguments. Their tendency is to assume that the cost of extracting hydrocarbons, and the efficiency of using them, are stationary targets. By contrast, efficiency gains in wind, solar and other forms of renewables have been impressive, and are likely to continue to gain.
There's a problem with that analysis. There continues to be improvements in the old reliables of oil, natural gas and coal.
Two recent stories drive home that point. The first is in a recent issue of The Economist. It reviews how there continues to be significant changes in the efficiency of the internal combustion engine, progress that over time should increase its economic competitiveness against other forms of energy seeking to displace it.
Another is on a subject that Platts has written about extensively: the rise of natural gas production from shale formations in the US. The New York Times has an overview story today, with nothing particularly new in it. But coming just after The Economist story, here at The Barrel we couldn't help but think about how all the comparisons of the killowatt or BTU price of alternatives run their numbers against current prices, which is understandable, since we don't know the future price.
But what if the combination of enormous discoveries of natural gas and other efficiencies, like those outlined in The Economist, begin widening the gap between alternatives and conventional consumption of fossil fuel? The gains posted by alternatives might be needed just to keep up with those improved efficiences, and won't be able to make gains in cost-effectiveness.
All of this could change dramatically. Peak Oil theory could be true, and we may be headed for an oil crisis that not even shale-based natural gas and combustion engine efficiencies won't overcome. A carbon tax or cap-and-trade system would add unknown costs to fossil fuel consumption.
But it's always important to remember that just when the conventional wisdom is all set -- oil gets high, natural gas gets high, engine technology comes as far as it can -- the script can be rewritten in ways nobody envisioned.
You make some good points--and as well one needs to consider that whatever inroads alternatives make against conventional fuels helps to improve the supply vs demand for these fuels thus keeping costs in line. The best thing that can happen of course is that competition keeps advancing the technologies in all fields. I have no particular axe to grind except perhaps with extremists who are not practical,as I will always strive to use sparingly what is the lowest cost energy source.