A few years ago, many energy analysts predicted that higher oil prices would bolster alternative energies such as biodiesel or wind power by making them more financially attractive.
In many cases, though, the opposite has occurred: even as crude-oil prices approach $100, some alternatives look less attractive than in the past. The reason: High energy demand is driving up the prices of raw materials involved in making many alternative energies:
- palm-oil prices have increased by more than 90% jump over the past three years
- prices for uranium have increased more than sevenfold over the past four years.
As more nonoil commodities evolve into oil alternatives, they will start to be priced the same way as crude. Palm oil, until recently viewed primarily as a source of cooking oil, is now increasingly seen as an energy source. Over the past three years, palm oil’s price has risen by roughly the same amount as crude oil.
Source: WSJ, 05/11/07
