Monday, August 25, 2008

Fuel Price Yo-Yo & DOD Implications

I'm not the first to put it like this. There's an oil price yo-yo going on right now: price goes up, use goes down. Use goes down, price goes down. Price goes down, use goes up, etc. It could be like this for quite a while. However, some people are aiming to give this yo-yo a jerk.

Former SAP VP Shai Agassi has a plan to get the world's cars off oil. I wrote about him here in January when gas was hitting $3 a gallon, and Wired just did a cover story on him here with gas in the US pulling back below $4.

Well, there are a heck of a lot of folks working on this problem and he's just one guy, relatively young, and with very little energy or transportation experience. So he's probably not going to do much, right? But what if he's even partially successful?

Fewer combustion engine cars will mean lower oil demand. Look what's happened to US demand and gas prices in the last few weeks. If entire countries get off oil, demand will plummet and prices will drop. Perhaps this means the Air Force and the air industry will get a a longer runway to develop alternative fuels and approaches as jet fuel remains more affordable, longer?

As a friend if mine said, though, the yo-yo effect doesn't go on forever. At some point further along the Peak Oil curve, use goes down and prices still go up. Well before then it will be good if the Air Force has transitioned fully to the synthetic fuels its aggressively pursing today. F-15s just hit mach 2 on synth fuels !!!