Bloomberg reports:

Crude oil may reach a record $130 a barrel this year because pension funds are investing more in commodities, said Pierre Andurand, the chief investment officer of BlueGold Capital Management LLP, a hedge fund….

“Next year, oil may rise even further to $150 a barrel.”

OK, this is a hedge fund guy who is betting the ranch on oil and probably doing his part to drive up prices. But at the end of the day, this is an issue of fundamentals — supply and demand:

Oil companies such as Exxon Mobil Corp., Royal Dutch Shell Plc and BP Plc are finding it tougher to replace their findings and are drilling for harder-to-reach deposits while energy demand and crude prices surge to records.

Another little-discussed factor in the run-up off oil prices is the run-down of the dollar and with it US living standards compared to the rest of the world — thank you so much President Bush!

Investors who are flocking to oil may be exacerbating the U.S. dollar’s plunge and pushing oil prices to new highs, according to the president of Cambridge Energy Research Associates Inc.

“What you have normally is the flight to dollars as a refuge, but today instead there is a flight to oil,” Daniel Yergin said in an interview in Washington on March 5. “It reflects not only a weakening of the dollar, but the expectation of further weakening. Oil is a giant hedge against the dollar.”

Thanks to the housing crisis, huge trade deficit, and a decelerating economy, we have a plunging dollar. That in turn has “pushed investors to buy oil, which has held its value better than the dollar. The result has been U.S. gasoline consumers being swept up in investors’ flight to oil, Yergin said.”

If this sounds like one of those vicious cycles in the climate, which threatens to spiral out of control, that’s because it probably is.

Related Posts:

• Shell: Conventional oil peaks within 7 years
• Oil breaks $100 — Why and what do we do?
• My 1996 warnings and predictions: “MidEast Oil Forever?” — Part I: Drifting Toward Disaster
• “Mideast Oil Forever” — Part III: Abandoning the Solution
• Why I don’t agree with James Kunstler about peak oil and the “end of suburbia”
• NASA’s Hansen: Implications of ‘Peak Oil’ for Atmospheric CO2 and Climate
• Get used to high oil prices
• IEA warns of impending oil and gas supply crunch

Last week, EPA Administrator Stephen Johnson published the official explanation of his decision to deny a waiver of preemption for California’s program to reduce greenhouse gas emissions from vehicles. Robert Sussman, Senior Fellow at the Center for American Progress, has a very good discussion of the misguided reasoning Johnson uses. The bottom line:

The role of state programs under a comprehensive climate change framework may be a legitimate subject for debate by Congress as it writes legislation. But Johnson’s job wasn’t to make policy judgments that belong to Congress. It was to apply the law. He failed in that responsibility. Although his decision will probably be undone, it will regrettably divert precious time and energy from the urgent task of slowing global warming.

Related Posts:

• More on White House overruling EPA staff
• Bush Administration vs. Everyone Else

[As noted, GM and Toyota have soured on hydrogen fuel cell cars, and grown more optimistic about electric vehicles -- finally catching up with most of the rest of us.]

Further evidence that the action is in electric cars and the batteries that will energize them: General Electric has invested $4 million in Th!nk Global, and $20 million in A123. Business Week reports GE plugs into electric car investments. And Th!nk has debuted a larger concept car, which it has developed with an unnamed major automaker. Green Wombat has more info here.

Pretty soon it might be down to BMW and Honda advertising the hydrogen dream, with the California Air Resources Board acting as enabler. CARB staff is recommending lowering once again the required number of zero emission vehicles — this time by a mere 90%! Honda, the supposed H2 true believer, is actually given an incentive to produce fewer of its much touted Clarity FCV.

The Air Resources Board could probably find a way to lead by prodding early commercialization of battery ZEVs or plug-in hybrids, but instead it appears to be regulating itself into irrelevancy.

– Marc G. Plugs and Cars Blog

Economic models greatly overestimate the cost of carbon mitigation in large part because economists simply don’t believe (and hence don’t model) that the economy has lots of high-return energy efficiency opportunities. In their theory, the economy is always operating near efficiency. Reality is very different than economic models.

I have never visited a factory or commercial buildings that didn’t have huge energy-saving opportunities, many of which also increase productivity. I wrote a book several years ago with a hundred real-world case studies: Cool Companies: How the Best Businesses Boost Profits and Productivity by Cutting Greenhouse Gas Emissions. Studies that model such real-world savings, like the 2007 McKinsey & Co. report, find deep emissions reductions are possible at low net cost to the U.S. (and world) economy.

Government has a very important role in enabling these energy savings. The office of Energy Efficiency and Renewable Energy at the U.S. Department of Energy, which I used to run, has lots of (underfunded) programs that deliver savings every day. One typical example showed up in my inbox yesterday, from the Industrial Technologies Program:

Optimizing boiler operation, reducing boiler blowdown, and implementing an ongoing steam trap maintenance program are just some of the steps Chrysler’s St. Louis complex took to save approximately $627,000 per year in energy costs. The complex, which produces mainly cars and light-duty trucks, received a DOE Save Energy Now energy assess­ment from Energy Expert Riyaz Papar of Hudson Technologies. Papar worked with two Chrysler employees to analyze the complex’s steam system utilizing DOE’s Steam System Assessment Tool (SSAT) software. By implementing several of the assessment recommendations, the complex achieved a simple pay­back of just over two months and is saving more than 70,000 MMBtu in natural gas annually. To learn more and see which Save Energy Now energy savings recommendations can be applied to your plant, read the case study (PDF 578 KB).

Why don’t companies take advantage of such amazing efficiency opportunities on their own?

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