July 18, 2024


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Will Rising Oil Prices Finally Help Green Companies?

Will Rising Oil Prices Finally Help Green Companies?

All indications report the second half of 2009 saw oil prices continue to escalate and many experts believe triple digit prices per barrel will be the norm again. Oil futures on the New York Mercantile Exchange have risen more than 50% since the beginning of 2009. Higher gas prices should have pundits predicting the American public will jump back onto the green energy band wagon.

Surprisingly, financial gurus speculate that the rise in oil prices may not be the boon to green companies that many people expected.

First, prices will probably continue to rise as China’s economy becomes even more oil hungry, fueled by massive government stimulus measures. That means oil supplies are unlikely to be able to keep up with crushing demand as China ramps up its manufacturing activity to an unprecedented degree. Couple that with the fact that America’s oil inventories have been falling steadily and it has been a long, hard 2009 for U.S. consumers.

Why isn’t this all GOOD news for green energy companies?

A large part of the problem is stinginess on the part of lenders and venture capitalists as they nervously wait to see how the predicted oil crisis will play out. That means that green tech companies most in need of capital will have to wait, as well. There may be money available for the strongest green tech firms, but the economic uncertainties will likely be a tough time for smaller companies, and especially startups, which will mean some of the brightest ideas won’t be available to help America weather the newest oil storm.

To America’s credit, oil demand leveled off in 2009, but analysts predict that more expensive oil prices could put a damper on the fragile recovery process of the U.S. economy. That will trigger a domino effect that can further hurt America’s recovery as investors shy away from green energy startups… and from startups of all kinds as the country’s future outlook becomes more tenuous.

However, the future of green technology still looks bright in the long run. As oil and gas prices continue to rise, the world’s mindset will inevitably change, eventually making green energy a first choice in a wide variety of applications instead of the poor stepchild it has been considered for decades. Over time, expensive oil will lead to its demise as a fuel source.

The problem for green firms isn’t the future… it’s staying in business while they wait for the world to catch up.