The world is not chasing a shrinking commodity. Everyone is in it for money. As long as the price stays high it makes looking for it easier from a profitability standpoint. They can look in more difficult places (more costly places). So the commodity is not shrinking they are constantly more & more discoveries through-out the world. It just cost money to get it out of the ground (ocean, whatever).
Innovation in the energy market is also spurned on by higher oil prices because it is only at these higher prices of oil - that the alternatives start to become more attractive. I was identifying the investment risk of these innovative business ventures because the commodity (oil) is very plentiful in the world - last estimates I read about there were over 500 years of supply projected using an increasing rate of consumption.
The problem with competing with petroleum energy is how efficient oil is and therefore - how productive it is. IF you per chance develop an alternative - let's take ethanol (which is not new - it has been around since man learned to distill) why are we looking at it right now? The cost of oil has risen to a point at which this is now an economically viable competitive energy source. What is interesting (again) is how the government has tipped the table by subsidizing corn production that is used for ethanol. The government has (again) artificially caused the price of food to rise because if corn growers can get more per bushel selling to ethanol plants than at the food market - the food markets have to raise their price to compete with the energy market.
By raising the price of corn - this has also raised the price of everything that feeds on corn (like eggs, chickens, turkeys, beef, milk, etc). And because the oil is high - the price to get it to market has also gone up. The government has created a double hit on the food through energy policy. Given this fact - I would argue that the government has purposely caused the price of oil to go up to a point at which ethanol would be competitive - to force innovation in ethanol distilling. I am not stating this as a fact - I offer it up as a speculative viable government policy to spurn investment in ethanol or other alternative fuels.
Anything that conserves or is more efficient than oil that is developed - will sell right now. HOWEVER, once the controls that are on that commodity (oil) are lifted - that innovation could potentially become less viable. IF gas has to be over $4/gal for ethanol to be economically competitive - then ethanol will sell. BUT, IF gas is at $3/gal maybe ethanol is not so competitive (right now that is true).
The war on terrorism is what has caused the value of the US dollar to go down because instead of raising taxes or cutting domestic or foreign spending the US government has chosen to print more money. More money chasing the same number of goods --> lowers the value of the money. Almost ALL oil transactions in the world take place in US dollars, therefore the price of oil goes up because the value of the US dollar is worth-less. That is the monetary policy that is helping oil prices stay high. The US government could choose to cut spending to fund the war but that might cause political powers to shift.
You asked what innovators or inventors should pursue - I am just trying to assist in identifying the business risk involved here. I know that you might not believe the fact that the US is producing less energy and consuming more now (than in 1985) - but I am just stating facts. "In God I trust - all others bring data." Sorry again for the length but macro-economics takes more than a paragraph for me to explain.
I hope this helps, God Bless, Ed R.
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