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The price of energy we calculate our energy investments on is totally historical. This is a huge problem. Making calculations for the future, based on prices of yesterday. Cheap oil is over, what's left is declining, more expensive to produce (heavy, dirty, difficult to extract and expense to refine), more expensive to transport, is left in countries with an other agenda than the energy deficit countries, has a much lower net energy efficiency ratio (exploring it cost will cost more and more produced energy) and global demand will grow (even when the global economy will suffer severely under high energy prices). The reasons are mentioned above, there is no need to point out them again. Energy will become in the next years 2 till 5 times more expensive than it is today. Any technological analyst who draw the energy price curve will say that with knowing any of the above mentioned fundamentals. If it will be 2 or 5 times more expensive depends on the effect of the higher prices on the global economy. The solution for high prices is high prices: high prices kills demand more effective than any conservation campaign ever could. When investors analyze the global energy situation they know that further income calculation must be made on energy prices of at least $ 250 a barrel oil. The problem is that the general consciences in the financial world (due to denial) is a calculation based on $ 80 per barrel oil. We must leave all energy fairytales: the will bring us in severe problem. Coal is not cheap. All energy prices leveling each other. When the one becomes expensive, the others will follow. Coal has risen more than oil the last years, but nobody knows and nobody use the actual price of coal in their calculations. As coal to power plants are dedicated to coal, they have no way of diversify their fuel. They just need coal. The amount of currently in production coal plant is so giant that the price of coal will explode in the next years. Everybody is building coal plants without any long term purchase contract (no in terms of supply and certainly not in terms of price). Where must all that coal come from? The miners doesn't know it. If they doesn't know it, who will know it. The price of energy will explode. There will be actual physical shortages. Future energy price calcula­tions needs a wake-up call. If the future price reality is rolling in the energy investment calculations. Energy investments will explode and become huge in both financial volume as in financial performance. The only thing future energy investments needs is actual/future energy data/perspective on energy supply/demand and thereby on energy prices. The market situation (supply and demand) is one facet of the energy price.

Author: Gijs Graafland

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