Renewable Energy: Risk of Market Bubble 15 comments
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Could a market bubble be developing in the renewable energy sector following last year’s explosive growth in M&A activity? A new survey by KPMG indicates there is a significant risk of such an occurrence.
KPMG estimates that 2007 saw $55.7 billion in M&A transactions, up by 47 percent on the year before. Competition for deals is likely to increase, as will the pace of consolidation, the survey concludes.
Some industry players appear to be ignoring the many risks involved in investing in renewables, such as the ability of national governments to change their green energy policies.
Perhaps more interesting than the pace of the growth, though, is the varied nature of the deals. “One common factor, however, is that the big are swallowing up the small.” M&A activity has been encouraged by:
- regulatory changes
- traditional energy companies seeking to improve their foothold in the market
- power generators — 89% of all power generators purchased a renewable energy firm in the past three years
Fifty percent of respondents polled in the study thought there was a “significant risk” of a market bubble developing in the renewable energy sector in the near term.
Another sign of a bubble is small investors piling in where bigger, seasoned ones are more cautious. Two-thirds (66 percent) of the largest companies (those with annual revenue over $10bn) agree that a bubble is a possibility. Far fewer (44 percent) smaller companies (with revenue under $500m) are concerned.
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Petroleum is infinite and renewable: www.wnd.com/news/artic...
The planet has been in so-called "crisis mode" for the past 10,000 years. See The Doomsday Myth: 10,000 Years of Economic Crises - www.amazon.com/Doomsda...
I worry more about where I'm going to get my next pedicure than I do about peak oil or climate change.
500 degree temperatures are no problem for oil. See here: www.bloomberg.com/apps...
And you think we are in a bubble?
Keep selling and I'll keep buying. In ten years you will look back and ask what the hell were you smoking.
If you really believe we have a creamy nugget center of renewable oil that refills our depleted oil fields, why has the US out put declined steadily over the past 35 years? Why have we become so dependent on foreign oil...which now looks to be mostly in decline too?
Oh yeah its those greedy oil companies. Lets tax the hell out of them and stick it to the man!
Those reserves are minuscule when you consider how much oil we use in our economy today (85+ million barrels a day and growing). On top of that we have basically forbidden our oil companies from drilling their or even searching for new oil supplies.
Well I hate to say it, but take a look and see how many off shore oil rigs are currently available to us to extract those resources?
www.financialsense.com...
Nearly all of them are being used by other countries who do see the energy crisis at hand and now are going to kindly profit off of it.
Even if we start drilling or going after those small reserves we have scattered around the US, it will take at least 10 years to bring them online at full capacity. By then we may be paying $10 to $20 dollars a gallon.
Which brings us back to the point....are we in a bubble? I don't see excessive supplies of anything in the energy arena...especially in the alternative energy arena. I only see ever higher prices due to massive demand (from other parts of the world) and lack of supply. We in the US are clueless. Most of these posts present that point. We in the US like to live under the mercy of global energy prices. It shows through this article and comments on how little we are doing to invest in our energy security. We are indeed going to pay for dearly for our apathy.
www.bloomberg.com/apps...
The U.S. is the most drilled and most explored territory in the world, a veritable Swiss cheese of oil wells, in all 50 states including Alaska.
The U.S. had an original oil allotment second only to Saudi Arabia. However, the U.S. started using its oil 100 years ago. Remember Pennsoil corp.? Named after Pennsyvlania, which was once a fertile oilfield, but it has dried up. Remember Texas being a huge oil producer? The Texas oil wells have mostly dried up (except for small wells producing a few barrels a day). If the Earth has a creamy nougat center of oil, why isn't it replacing the oil in Texas, Pennsyvlania, and the other 48 states?
Remember that the Alaskan oil was going to save us? We have been drilling for oil in Alaska for 40 years now, but U.S. oil output is still lower than it was at its peak in 1970. Yes, 98% of Alaska is open to oil drilling, but Exxon-Mobil is greedy for that last 2%, in the Arctice National Wildlife Refuge (ANWR) and natural parks too. The Gulf of Mexico -- we are drilling heavily there, but U.S. oil output is still declining, and has been since 1970. You think it's coincidental that the developed world, the nations that were first to industrialize and use their oil, are the first nations to have used up their oil? Iran and Iraq do not have more oil than the U.S. because they had a larger allotment to start with -- the USA had more oil than either nation, but we have spent 100 years using up our own oil, and now we are using up the oil of every other nation besides. Most nations are already in declining production of oil, including the UK (North Sea oilfields drying up), Mexico (Cantarell is drying up -- the 2nd largest oilfield on Earth), Indonesia (an OPEC member that now imports oil), the list goes on and on and on. You'd think at least one of these nations would know about it if their oilfields suddenly, magically, started replenishing themselves! Why would nations import oil if all they had to do is wait for the oil wells to magically replenish themselves?
Still, you were directionally correct. Worldwide demand is either 86 or 87 million barrels--thus the upward spiral in price.
Oil prices will come down when price has killed demand (i.e.; we stop using so much because it costs so much).
I agree that the stock prices of the alternative energy plays can be (or are already) in a bubble. Most are operating at a loss (or depend on subsidies). No one knows which companies, or even which technologies, will succeed in the marketplace. We keep buying more shares, the stock price goes up, and we buy more shares. Price corrections are inevitible; do not dismiss the possibility of a bubble and correction.