Will Oil Hit $200 in 2008?

Oil recently touched that cleantech milestone of $100 a barrel, sending pundits to speculate if the price would go up or down in 2008. Apparently the speculation among those with the most to win (or lose) is to the upside. According to Bloomberg, traders are starting to bet that the price of crude will actually double, to $200 a barrel, by the end of 2008. The report sites a record run on options to buy oil for $200 on the New York Mercantile Exchange.

Indeed, demand for oil is rising, thanks to China and India, while reserves are diminishing. The Oil Drum sees the $100 price as a sign of a pending oil shortage that’s been in the works for more than five years:

The world is now reaching the point where all of the oil fields of the world are in aggregate coming to peak production . . . Once production falls short of what is needed, oil prices can be expected to increase, so that demand is brought in line with available supply.

What does that mean for cleantech? While oil prices and cleantech investing are linked in a variety of indirect and direct ways, the growth of alternative vehicles will likely rise along with the cost of gas at the pump. Shai Agassi, CEO and founder of electric vehicle infrastructure company Project Better Place, comments on the $100 oil price on his blog, and calls for more investment to ease oil demand:

Dependence on a scarce and expensive substance is called an addiction. We are all addicts. We value our freedom to drive more than many other freedoms that have a specific amendment in the constitution.. . . We have to put our money into easing demand before it is too late. Addicts who wait for the crisis do not recover in the same shape as they were before a stroke or heart attack hit them.

In theory, investment into ideas like Project Better Place could help “ease” demand, though we’re unsure if, in reality, the plan actually stands a chance — building an electric vehicle infrastructure could be prohibitively expensive. We are sure that if the price of oil hits $200 by the end of the year, it will bring more attention, and investment, into alternative vehicles that would help ween us off of our oil addiction. Which is a good thing.


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