(image: lpi.usra.edu)

Burning fossil fuels plays a well-known role in causing climate change, but a new scientific paper analyzes how fossil fuel mining—never mind burning the stuff—could also affect the climate by changing the shape of the earth, reports the blog Seeking Alpha.

According to the paper, which will be presented in India at the AGU Chapman Conference on Complexity and Extreme Events in Geosciences, the extraction of fossil fuels may have a noticeable impact on the earth’s total mass. For you math whizzes there’s some talk of “the moment of inertia” and “the angular frequency of the earth,” but the gist is that extracting so much oil from the northern hemisphere may have upset the earth’s balance and tilted it. More tilt could mean more extreme summers as the earth revolves around the sun.

This is only one paper presented at one conference, so it’s not exactly well-established science, but if it’s true we would agree with the paper’s author that it “[makes] the process of climate change such as global warming more complex to understand.” Not that we really understood it in the first place.

A strong dollar could keep oil prices down in 2010. (image: weakonomics.com)

Forces such as emerging market demand, speculation, and a weak dollar—all of which have supported higher oil prices in 2009, despite a recession—may not sustain oil prices in 2010, according to an article published on Seeking Alpha on Monday. First of all, signs exist of a global tightening of monetary policy, said author Peter Cooper. In addition, the true strength of emerging market economies, such as China, is being called increasingly into question.

Third, the US dollar is recovering after an extended decline against the euro. Cooper cited weak global demand caused by the recession as a fourth reason that oil prices might be lower in 2010, as demand could lag even as the global economy lurches toward recovery.

Some analysts agree with Cooper, a Dubai-based financial journalist specializing in Middle East business and finance. Deutsche Bank’s chief energy economist Adam Sieminski predicts a stronger dollar in 2010, which he believes will ultimately put “downward pressure on the oil market, or at least take away a support.”

As the dollar rises, commodities traded in dollars, like crude oil and heating oil, tend to decline in value because they become more expensive to investors who hold foreign currency.

In addition, optimism regarding the dollar raises the possibility that the US could hike interest rates in order to head off inflation. If interest rates do climb, look for the dollar to gain even more strength and intensify the downward pressure on commodity prices.

Which direction will oil prices turn? Another analyst predicts falling oil prices. (image: beastiekeith via flickr.com)

Seeking Alpha, a prominent website that analyzes all things related to investing, has posted an entry suggesting that the price of crude oil will continue to fall in the upcoming weeks. The primary reason is due to the market fundamentals: supplies of oil are extremely high while demand is relatively low, as others have also indicated. In addition, recent comments by Ben Bernanke may contribute to the price decrease; by suggesting that the American economy still faced problems, investors moved their money out of commodities such as oil and into the dollar, which pushed the price of crude downwards. But, with weak fundamentals, the dollar doesn’t need to rise for the price of oil to drop; it only needs to stabilize.

Dubai skyline. (image: seeker401.wordpress.com)

Will supply and demand finally bring down the price of oil?

That’s the question asked last Wednesday by Brad Zigler at Seeking Alpha, who suggests that the high supply and low demand of oil could cause the price of oil to fall over the next few weeks. After eclipsing the $80-per-barrel-mark earlier this year, the price of oil has slowly dropped; late last week, the benchmark oil futures contract was briefly selling at $72.39, its lowest point since October. Many analysts, such as Pierre Lorinet, CEO of commodities trading company Trafigura, have said that market fundamentals indicate that the price of oil is far higher than it should be. It’s also quite possible that oil prices could fall if economic turmoil in Dubai and the strengthening of the dollar continue.

A worker builds wind turbines at a GE factory in Shenyang, China. (image: ge.com)

China has been investing in US clean energy projects and many are not happy about it. Last week it was the announcement that China-based ENN will be teaming up with Duke Energy to bid on contracts for utility-scale solar farms and large commercial solar projects in the US.

This week it’s China’s role in a large-scale wind power project in Texas, reports the New York Times. Many unhappy readers wrote to the newspaper after learning that China, along with a coalition of other investors, will be financing the project. The outrage is over the possibility that some of the monies might come from the $22 billion of the economic stimulus package marked for clean energy projects and, more importantly, new jobs.

Although the project will create a few hundred jobs in the US, many more—approximately 2,000—will be created in Shenyang, China, where the 240 new wind turbines will be manufactured by A-Power Energy Generation Systems. The 600-megawatt wind farm will be the largest Chinese investment in US renewable energy, and is expected to cost about $1.5 billion.

The angry letters prompted a politically expedient response from Cappy McGarr, a managing partner with U.S. Renewable Energy Group (US-REG), a partner in the Texas wind deal along with an Austin-based wind developer, Cielo Wind Power. McGarr emphasized that the wind farm will go far in helping the US attain energy independence. Without this international partnership, he said, the project would not have been possible, and the resulting jobs and revenue would not exist. He added that many of the parts for the turbines would be made by General Electric.

Reaction to the project has not been positive. Douglas McIntyre at Daily Finance called it “a sad day for the U.S. renewable energy business,” and said, “it’s a sign that the campaign for America to rely less on fossil fuels is gaining some traction, but the tools to allow it to happen will be marked ‘made in China.’”

The Wall Street Journal’s coverage was more neutral, pointing out that Chinese companies will be involved in the sort of higher-value services that white-collar America needs. Seeking Alpha wonders if one of the best places to work in the future may be at a US subsidiary of a Chinese company.

About 330 jobs will be created in Texas as a result of the project, according to the Department of Energy’s National Renewable Energy Laboratory JEDI (Jobs and Economic Development Impact) analysis. About 734 indirect jobs will also be created.

Michael Kanellos at Greentech Media weighed in with a discussion about how the deal represents a significant shift from the past several years, when China wanted to remain anonymous about its investments. This, Kanellos maintains, is more proof that China wants to make a serious mark in green energy in the US.

But China has been making a mark in the renewable market in the US for some time; they were just much quieter about it. Russ Choma, a reporter with the Investigative Reporting Workshop, a nonprofit investigative journalism project attached to the American University School of Communication in Washington, told the New York Times that China has long dominated the solar panel manufacturing industry, of which 95 percent of its total output is exported to the United States and Europe.

Choma also noted that when it comes to stimulating the economy, it is the manufacturing that matters. He points to a 2004 study from the Renewable Energy Policy Project, a research institute based in Washington. The institute found that every 1,000 megawatts of installed wind capacity had the potential to generate as many as 4,300 jobs, of which about 3,000 are created at the manufacturing level.

But until that happens, we can expect to read more letters like this one that appeared in the Times.

“Thank you for killing the U.S. windmill industry,” wrote a reader from Chicago at the Times’ Green Inc. blog. “Thank-you, U.S. industrialists and financiers, for having us buy these things with financing and grants emanating from money borrowed from China.”

Has world oil production begun its irrevesible decline? (image: urbansprout.co.za)

Is it possible to “max out” the amount of oil we can produce per day? And, if so, have we reached that point? There is evidence that the answer is “yes” to both of these questions.
In the 1950s and 60s, prominent geologist Dr. M. King Hubbert developed the “Peak Oil” theory. The Peak Oil theory states that once the most easily available portion of a resource is reached, production has reached its peak, and then production will begin to slow. More details about the Peak Oil theory can be found in this HeatingOil.com article.

Some are speculating that we have reached the peak, and that production of oil can no longer meet global demand. An article on business analysis website Seeking Alpha states that production, demand and price trends over the past five years indicate that we have entered the decline phase Hubbert theorized about.

If we have reached that phase, it could be detrimental to heating oil consumers. After all, heating oil is ultimately derived from crude oil. If crude oil production has reached its peak, then we will enter into a spiral of never ending price increases for the world’s most important commodity.

According to Seeking Alpha, from 2004 to 2007, prices of oil doubled while consumption was also rising. However, production of oil remained flat. And while this could have been caused by OPEC and other oil suppliers looking to tighten the amount of oil on the market in order to drive up prices, it also could have been due to another reason: “OPEC likely knew it had limited production slack and did not want to use up its last ‘bullet’ before price rises started destroying demand.”

More evidence that we have reached the peak of oil production can be seen in the time period from May 2007 to February 2008. During this phase, daily oil consumption rose by 3.6 million barrels. However, daily supply only rose by 1.7 million barrels. The price of oil rose from $63 per barrel to $95 per barrel during these months, later peaking over the summer at a record $147 per barrel. According to Seeking Alpha, there wasn’t any excess capacity in the world’s oil reserves; as a result, production could not increase despite the effect the steep price increases had on the world economy.

Seeking Alpha also says that when the world wakes up from the economic slowdown, we can once again expect to see the price of oil climb, and fast: “Given the supply-side constraints (lack of capacity, depleting reserves, delayed projects) any form of a global economic recovery would risk pushing oil prices back up to the triple-digit range.”

So far, the position that Seeking Alpha has presented Is nothing more than hypothesis, but the trajectory of crude prices over the next year or two will prove it right or wrong.