Cheap Gasonline and Alternative Energy Do not go Hand in Hand-At Least not at First

Cheap Gasoline and Alternative Energy Do not go Hand in Hand-At Least not at First.

Everyone seems to be complaining these days about high gas prices, the need simultaneously lower gas prices and develop new, clean, alternative sources of energy. Both Political Candidates in this Election are promising lower Gas Prices, Development of Alternative Energies, and a "Solution to America's Energy Crisis".

Let's explore why this will not work. When gasoline and Oil Prices are high it creates the incentive to develop new energy sources. With Oil well over $100 dollars per barrel, and gasoline well over $3.50 per gallon, we seem to want to have our cake and eat it too.

If we were in Venezuela with gas at around 12 cents per gallon, what incentive do people have to invest money into developing new sources of Energy? None! It is too cost prohibitive. To make the Investments in developing new sources of Energy the Investors are going to want to know they are going to make their money back, and have a return on their investment. If gas was $1.00 per gallon in America we would not care about conserving energy at all.

Proponents of more oil drilling to lower prices and develop clean, alternative energy sources, are not consistent. There is no economic incentive to invest the Trillions of Dollars in Alternative fuels if the costs will not be recouped.

The High Oil and Gas prices are good for Americans! It encourages innovation, and spurs investments, and new ideas. As Oil Prices go higher, MORE incentive is created to develop alternatives, as oil prices go lower there LESS incentive. The term "Alternative Energy" is what it sounds like, and Alternative to conventional energy (Oil). The Alternative needs to be competitive in price. It is more difficult for it to be competitive with Lower Oil Prices, rather than Higher.

Since the World Oil Supply is running out anyways, and other fuels like Compressed Natural Gas are Clean Burning and abundant in America we obviously need to explore other options.

Lets assume that Oil Companies have invested profits from high oil into new energy Alternatives, and formed a viable new energy solution, such as Compressed Natural Gas, electric power, or solar, complete with new cars, and refueling/charging stations. If the fuel was truly an "Alternative" to oil, then even with a finite supply of oil, the price would have much less demand side pressure. This scenario is a long way off. So for now Higher Oil prices are going to be the only thing that spurs investment in Alternative Fuels, ironically Higher Oil Prices will be the catalyst that leads to the development of new Fuels.

*Note that I did not include any Environmental incentive in this argument. Currently I am assuming this is an economic argument only, since we do not have clear environmental regulations and mandates for development of Alternative Energy. Obviously there is always clear Environmental incentive to develop Alternative Energy. In Reality economic factors drive investment more than Environmental*