The Oil Drum

Over the course of this past week I happened to be at lunch with a senior state official who is closely involved in the development of alternate sources of energy for the state. As we discussed some of the current fluctuations in the market, and their impact on upcoming decisions by the state on investment, the current drop in oil price brought back, to both of us, memories of the `80's. Back in those days industry and the Federal Government were investing heavily in alternate sources of energy. And then the taps were opened in KSA and the price of oil dropped, and all those programs stopped. The investments were written off.

So here we are, with the world beginning, yet again, major investments in alternate sources of energy, and the official was becoming nervous that we are about to see history repeat itself. The concern is sufficient that a significant state investment is being postponed a year to see how the events of the next few months play out. Are we again going to see companies lose large amounts of money chasing technologies that will no longer be needed ? While I argued against such a decision, the nervousness and resulting caution is not restricted to one state official. I commented earlier in the week about the concerns I have heard from those in the oil industry, about the possible drop in prices. They've been here before, and barely survived the last drop and so are much more cautious this time.