Wednesday, November 02, 2005

Tree may provide new fuel. 20/10/2005. ABC News Online

The concept of Peak Oil that has been hyped in recent weeks is a really big joke. A few weeks ago, you would have thought the world was coming to an end because the world was running out of fuel.

The linked ABC news article is another neat example of alternative energy. The process of converting coal into diesel fuel was invented in the 1920's and was used to run Hitler's Panzier tanks. Now ABC reports that Scientist in Australia have discovered a similar process for converting a common Western Australian Tree into diesel fuel.

There is a big jump from discovering a fuel source and making it work on a commercial scale at reasonable costs. However, the truth is in the story that there truely is a bottomless well of energy on our great planet. Plants daily capture more energy than we use. More than 80 million acres of trees have been added to the US since 1920. We are not about to run out of fuel. The price of oil hit $12 per barrel in 1999 and it hit $70 a barrel in 2005. The appropriate supply should meet demand at about $35 per barrel in three years. Thus the wholesale price of gas (42 barrels to the gallon with a 10% craking spread) would be $.92.

By the way, if you run out and buy a hybrid car based on current prices and technology, you are making a mistake. Early adopters always pay too much. It would be wise to give the producers time to ramp up production. Prices will decline when the development costs have been recooped.