If a study from the University of California at Davis is correct, we’ll have to.
Authors Debbie Niemeir and Nataliya Malyshkina postulate that long-term investors are good predictors of whether and when new energy technologies will become commonplace. Using that benchmark, they predict that oil supplies will run out 90 years before alternatives are available.
“Our results suggest it will take a long time before renewable replacement fuels can be self-sustaining, at least from a market perspective,” noted Niemeir, a professor of civil and chemical engineering, in a press release. The study is intended to be a tool that helps policymakers set realistic targets for environmental sustainability and evaluate the progress made towards these targets.
Key elements of the study are market capitalization based on share prices and dividends of publicly held oil companies and alternative energy companies. These elements have already been used by analysts to predict events in finance, politics, and sports, according to the press release.
Malyshkina, a post-doctoral researcher at the university, added, “Sophisticated investors tend to put considerable effort into collecting, processing, and understating information relevant to the future cash flows paid by securities. As a result, market forecasts of future events, representing consensus predictions of a large number of investors, tend to be relatively accurate.”
She concluded that stronger policy is needed to foster development of replacement fuels.
While this is a bit alarming, it also seems a bit chicken-and-egg to me. Are investors analyzing the true technical feasibility of these alternatives, or are they simply being protective of their investments by not going too far out on a limb? It is a commonly held belief on both sides of the climate change debate that alternatives and renewables have a great deal of promise but aren’t going to be economically feasible in the near future. But we’re talking a very distant future here. The world is not going to run out of oil any time soon, and if more of our energy needs can be met by natural gas, we’re not going to run out of fossil fuels for a very long time. Add 90 years to that distant date, and today’s savvy investors will be long gone, passing their investment portfolios on to their great-grandchildren.
If alternatives and renewables haven’t caught up by then, we’re in dire straits indeed.
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