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Alternative Energy Market Gaining Share
By Armando Duke

Oil experts said Friday that market costs were unpredictable, while alternative energy stocks were gaining market share. Last week saw the creation of an alternative energy stock index, the government supporting the export of nuclear technology to India and the Middle East Policy Council examining the current state of the oil market with uncertainty.

As crude oil prices continue to show no signs of relief in an already nervous energy investment sector, the Middle East Policy Council released a statement Friday saying that future oil market costs were unpredictable.

James Placke of Cambridge Energy Resources was quoted on Friday as saying, "Saudi Arabia wants the oil price to remain low enough so that consuming nations do not seek alternatives to oil as their principal source of energy."

Singapore seeks to be gas hub, develop Alternative Energy sources
By Chua Chin Chye, Channel NewsAsia

SINGAPORE : Singapore will press ahead with innovative ways to maintain its status as one of the world's major oil hubs.

That could include building underground rock caverns on Jurong Island, or exploring alternative energy sources, such as solar power and hydrogen fuel cells, said Senior Minister of State for Trade and Industry, Dr Vivian Balakrishnan.

Speaking at the 20th Asia Pacific Petroleum Conference, Dr Balakrishnan spelt out the steps Singapore could take to stay on top of the energy trade. Already one of the world's major oil hubs, the island is positioning itself to become a gas hub as well.

With more than 70 companies, Singapore's Jurong Island is now recognised as one of the world's major oil and chemical hubs. The island is host to one of the world's top three refining centres, alongside Rotterdam and Houston. And in terms of the oil trade, Singapore is the world's third largest oil trading centre, after New York and London. But the city-state is not about to rest on its laurels.

"We are now seriously studying the possibility of building new underground rock caverns on Jurong Island. This will help us to overcome Singapore's space constraints and yet address the industry's requirement for competitive storage," said Dr Balakrishnan.

Current high oil prices have underscored the importance of diversifying energy sources. Already, about 60 percent of Singapore's total power is supplied by gas. Looking ahead, Singapore wants to become a hub for gas, as well as for oil.

"We are also studying the possibility of constructing an LNG terminal and developing a market for gas trading. Over time, we believe that like oil, gas will develop into a more widely traded commodity that will play a pivotal role in the energy market," Dr Balakrishnan said. He says oil is expected to remain the primary source of energy for at least the next 20 to 30 years.

Asia will be the region most hungry for oil, with demand from China and India expected to grow between 2.5 and 3 percent a year, nearly double the world's average. - CNA

What If Oil Hits USD100 A Barrel?

AOf late, oil has been hogging the news. Governments, corporations and ordinary people alike are alarmed and concerned.
There is a feeling of hopelessness about the surging oil price. What if oil hits USD100 a barrel, quoting a columnist in Forbes magazine who predicted that the commodity will be at that level in five years.

Well, if oil hits USD100, it will fall back to USD20, possibly even USD10. But not before it triggers a world recession and give the United States a genuine reason to reshape the map of the Middle East (which was one of the reasons why it invaded Iraq last year).

Those who say the current high oil price is here to stay and will continue to move even higher put forward the following arguments:

- Oil producers are unable to increase their output to any great extent.

- Even if they can increase output, there is not much spare capacity left among the world's oil refineries. It will take time to build new refineries.

- China and India have tilted the oil supply-demand equation. If the two economies keep on growing at the same rate of the past decade, world oil production will have to be raised by 43% by 2010 and three times in 20 years, said Stephen Leeb, a New York analyst and author of the book The Oil Factor.

I must say there is a lot going for the above arguments, but let me put forward the other side of the coin:

- The sharp rise in the oil price in the past year is a reaction to the low oil prices of the past decade. When one considers inflation and the depreciation of the US dollar, oil should not be selling at below USD20 a barrel - that was the case for much of the 1990s.

- There is currently a small supply shortage because of increased demand (from China especially). It's typical for commodities: a small glut depresses prices, and a small shortage causes prices to soar. Most analysts believe the current high oil price is temporary and point to share prices of oil producers which have lagged substantially compared to oil prices.

- It's true China and India are consuming a lot of oil. But they are also consuming a lot more of other commodities, goods and services. These have not risen as fast as oil.

But here are some reasons why I believe the oil price will not stay above USD50 a barrel for too long, let alone at USD100:

1. If the oil price stays above USD50 for more than a year, world economic growth will be stunted. This will lead to lower demand for oil (as well as other commodities) and prices will come down. If high oil prices triggers a world recession, demand (and therefore prices) for oil and other commodities will collapse.

2. If the oil price remains high, governments and consumers will take measures to cut consumption. Oil prices will fall very quickly.

3. High oil prices will result in more oil in the market in the medium term of one to two years. Producers will want to lock in their output at current prices, and new production facilities will be accelerated.

4. And so will be the development of alternative energy sources - nuclear, solar, wind, coal and hydro. The world is not short of energy - it's how much we are prepared to pay. For example, Australia has enough high quality coal to supply the world for 200 to 300 years. Add another few hundred years more if you take into account "brown" coal or coal with a high water content.

Canada and the US have heaps of shale - oil that is mixed with sand. This is costly to extract. But at the right price, you can have plenty of oil from shale.

Nuclear energy is the fastest, cheapest and cleanest energy source in the short term, and countries like China, Taiwan, South Korea and India are all going for it in a big way.

Oil producers know they cannot keep the current high price for too long. It's against their long-term interests. But while it lasts, they are enjoying the ride.