But the renewed interest in ethanol proved to be short-lived, as oil retreated below $20 a barrel just four months later. As a result, many of those smaller ethanol companies couldn’t survive as profitable alternative energy investments.

Flash forward to today, where we’ve seen crude oil prices double in just the past four months. Worldwide oil demand has soared, particularly from fast-growing countries like China and India, and although the global downturn has seen the pace of demand slow, when the global economy gets back on track, it should prove even more bullish for oil.

But there’s another sector that should rise, too…

Rising Oil Prices Spark Interest In Alternative Energy

With oil prices rising again recently, it’s sparked yet another conversation about the viability of certain alternative energies.

One ETF that tracks the performance of clean energy firms is the PowerShares WilderHill Clean Energy (NYSE: PBW) – a widely traded vehicle that gives you exposure to this still-growing sector in a safer way than investing in individual companies.

While firms like Exxon Mobil (NYSE: XOM) rake in billions of dollars per quarter from oil, PBW invests almost entirely in experimental, technology-focused “green” companies. And while these guys stand to benefit from higher oil prices just like specific oil companies, their success depends more on regulatory changes, subsidies and a global recognition of the need for alternative energy solutions.

The Alternative Energy Market Gets More Attention

When it comes to the alternative energy market, wind power, solar, hydroelectric, geothermal and nuclear power have all received attention over the past couple of years.

But when the oil market first began its march towards record high prices, it was the ethanol industry that took center stage and triggered the wider debate over cleaner energy resources.

However, the ethanol market faces a battle. Despite the government’s intervention and subsidies for the industry, newer technologies are needed in order to make ethanol more viable – and the industry’s companies profitable. A good example is Pacific Ethanol (Nasdaq: PEIX) – a company that Bill Gates invested in heavily a few years ago, paying $12 a share. Today, the stock trades for just $0.40.

Below is a daily chart of PowerShares WilderHill Clean Energy (NYSE: PBW), which is currently at a critical juncture:

Chart: http://www.investmentu.com/images/iu063009chart.gif

Three Scenarios for the Clean Energy Fund

As you can see, when the stock market bottomed out in March and oil prices retested their lows, PBW’s Clean Energy Fund did the same.

Since then, however, PBW has doubled off those lows to the June 10 high of $11.37. This is right around the swing high of $11.40 that it tested back in November, before it pulled back to the trendline drawn off the March lows.

In addition, the 50-day and 200-day moving averages are very close to crossing one another – a development that sometimes indicates a short-term top.

So what we have here is a relatively clear-cut conclusion…

• A close above $11.40 would be bullish and should lead to higher prices.
• However, a close below the trendline, currently around $10, would be bearish over the short-term.
• A close or two below the 50-day and 200-day moving averages, which are currently around $9.50, could lead to a move down to $8 or lower.

Source: Alternative Energy Investments: Three Scenarios For Clean Energy

This from Rude Awakening:

As crude oil languishes near a 5-year low of $35 a barrel, forward-looking investors have good reason to suspect that a new bull market is about to begin. Sure, oil prices might continue slumping over the near term. But don’t kid yourselves; the long-term price trend is up…maybe way up.

Back when oil was selling at $147, I said that the world does not run very well at such lofty energy prices.  A lot of things just stop working at $147 for a barrel of oil, particularly things with a large energy component.  The airlines come to mind.  So something had to give.  The world economy could crash (no jokes about airlines here…), or the price of oil could come down.

As it turned out, we had both events.  The world economy hit the wall, and the price of oil came down in almost a straight line over five months. And gasoline is cheap again, which is a welcome salve for our ailing economy.

Let’s think through some of the macro-benefits of cheaper gasoline in the U.S.  The U.S. Energy Department statistics state that the nation burns about 9.4 million barrels of gasoline per day.  That’s about 395 million gallons (at 42 gallons in a barrel).  Let’s say a gallon of gasoline is $2.75 cheaper than it was back in July, when I was paying $4.40 per gallon.  Take 395 million gallons per day, times $2.75 savings per gallon.  That’s almost $1.1 billion PER DAY that U.S. consumers are saving at the gasoline pumps.  That’s over $32 billion per month of savings, or nearly $400 billion per year.

In a sense, the world oil industry has given the American people a huge tax cut.  Or call it a “bailout bill” for consumers, except that Congress did not borrow the money to fund it.  And that $400 billion is not just money coming out of the hides of Big Oil and those bêtes noirs like Exxon-Mobil or Chevron.  No, this is a $400 billion cheap-oil tax cut paid for by the Sheiks of Araby, and Mr. Putin of Russia, and Generalissimo Chavez of Venezuela, and Mr. I’m-a-Dinner-Jacket of Iran.  Could not happen to a nicer bunch, eh?

But no good deal is entirely a good deal.  Just as the world does not work too well at $147 oil, the energy industry does not work well with oil at $35.  If $147 oil was a problem, then $35 oil is actually NOT the solution.  Cheap oil might even be worse for the world over the long term.

What do I mean?  Well, at $35 per barrel of oil, the incentive for energy efficiency and conservation is not high.  Heck, people are back to buying SUVs, if they can get a car loan.

And low oil prices are a major stumbling block to building out the next generation of energy systems like advanced windmills, solar, geothermal, tidal power and advanced biofuels.  Really, the world needs these items sooner or later.

Also, the traditional energy industries need prices about $75 or so to keep up levels of investment in new projects that require several years to build out.  That’s just to try and maintain current levels of fossil fuel output, which are declining in any event.

That is, world oil production has already peaked at about 86 million barrels per day.  We were probably never going to change that overall fact of energy-life back with oil at $147.  But we sure aren’t going to change it now that oil is selling at $37.  It’s the Peak Oil argument.

Depletion, of course, is still with us all day and every day.  Indeed, we could see swift declines in oil output from some major oil provinces of the world.  Mexican oil output is already declining fast.  Russia may shock us in 2009 with significant decreases from some older fields.  Saudi Arabia is problematic, despite all the happy talk from Riyadh.  The problem is that most of the world’s oil comes from giant fields that were discovered more than 25 years ago.

When people say things like “There’s still a lot of oil out there,” they are not necessarily wrong.  But they mean that there is a lot of oil out there that is NOT in giant oil fields. It’s oil that you will not drill up with just a relatively small number of high-output wells, like in the big oil fields of Saudi or Russia.

The “lots-of-oil” crowd is talking about hydrocarbon molecules (not necessarily light, sweet crude either) in deposits that are more dispersed, further out, in deep water, under more rock or salt layers, with higher temperatures and pressures.  Or they are talking about heavy oil, or bitumen in tar sands, or kerogen in oil shales, or even some transformation of coal.

When people use the expression “lots of oil,” they mean the expensive stuff.  It’s oil that requires many expensive wells or immense processing facilities, drilled or built with technology that we have just barely invented.  And it’s the oil that you will never see if prices stay at $35 per barrel for long.

That’s why oil probably won’t stay at $35 per barrel for very much longer.

Source: The End of the Oil Bust

Such a wide gap between near month contracts is unusual.

But, “The last standing bulls are rolling over” to buy the February contract while “dumping their January oil on the market,” said Phil Flynn, of Alaron Trading.

Meanwhile, OPEC President Chakib Khelil said that the cartel could continue to slash its output, beyond the 2.2 million barrel/day cut already agreed to.

“We will continue this reduction until the price will stabilize,” Khelil said, while adding that, “We feel very strongly that what happened in 2008 and what’s happening now is due in great part to the speculation.”

And Saudi Arabian Oil Minister Ali Naimi reiterated that $75 a barrel was a “fair and reasonable” price for oil. We shall have to see whether the market agrees.

Source: Crude has wildly divergent day

Despite the current, volatile environment, though, the expert team at Casey Research maintain their core prediction: that a highly inflationary cycle is not far off. While we, along with several external experts, continuously review our assumptions and conclusions and encourage dissenting opinions and analysis to avoid biased conclusions, so far we keep returning to our views about what’s coming. That said, the hardest thing to predict is not what will happen, but when.

The way I see it, the swift, far-reaching and mostly ill-conceived reactions from most of the world’s governments under the leadership of two apprentice sorcerers (Bernanke and Paulson) have until now resulted in a widespread run for an exit to nowhere, a deep credit freeze, and total and indiscriminate mistrust in the market and all of its players.

The fact remains that in the last year, many principles that have long been rooted in the success of capitalism have been thrown out of the window.

• First, market players discovered that the longest-lasting asset bubble in recent history was made possible by poor regulations (as opposed to lack thereof), greed, and the misunderstood and misrepresented risks of credit derivatives.
• Second, we found out the real meaning of “too big to fail.” If a business is large enough and has enough clout, it doesn’t matter how poorly managed it has been, it will be bailed out at the expense of taxpayers (us) and investors (us again).
• Third, we found that the rating systems the financial markets had been relying on have been misleading investors and failing to identify some of the riskiest asset classes. As a result, investors and all other economic agents are left with no means of evaluating risk as they conduct business, hence the credit freeze and rush to cash.
• Fourth, to add to the confusion, the U.S. Fed and Treasury, followed by many other central banks, have been altering the rules of the game by the minute (buying toxic waste at face value, bailing out certain financial institutions but not others, becoming shareholders of several behemoths in the banking and insurance industry, and trumping all accepted rules of creditors’ and stakeholders’ priority, prohibiting the shorting of certain classes of assets on a moment’s notice).
• Last but not least, the U.S. presidency, weakened by almost eight years of mismanagement, has continued to show total lack of leadership. It has empowered a couple of technocrats to run the country’s finances without leadership until a new administration gets in and, hopefully quickly, figures out what to do. To make matters worse, the EU has shown its ugliest face and demonstrated a fact we all truly knew but didn’t want to recognize until recently — that economic unity and coordination is easy in good times but almost impossible when the going gets tough.

No wonder economic actors are wreaking havoc as they race for shelter.

Add to this the fact that all natural resources have been hammered by the combination of a credit freeze and lower real and anticipated demand from most industrial nations.

Finally, junior exploration stocks – being very thinly traded and rightfully considered to be in a higher risk class — have been hammered twice as hard as the rest of the markets (hence the performance of the TSX-V, which has lost 76% in the last year and 30% in the past 30 days alone). The fact that many hedge funds had to unwind large positions in such a small market certainly did not help values.

What does this mean for investors in this market?

We all have suffered significant losses in our portfolios, and although our choices may have reduced some of the downside, quality companies have been hit almost as hard as fly-by-night juniors with no future.

Several of our companies are trading at or below cash value and get no goodwill for the significant assets and outstanding management teams they have assembled.

Although there is no way to tell when we will hit a bottom in these markets, we believe that once tax-loss selling season is over and reality settles in, we will see the beginning of a slow recovery process for the best of the juniors. Investors who have the ability to stay the course and are invested in the highest-quality juniors will recover from their losses and benefit from what will eventually be another bull market in commodities.

Precious metals and agriculture, followed by certain segments of the energy sector, will lead the way to widespread price increases across the range of commodities. While we can’t predict the exact timing of this run, the fundamentals are in place once the world economies take a turn for the better or at least stabilize somewhat.

Here is why:

• The current crisis is taking tremendous amounts of needed capacity off the supply pipeline. Whether it be energy, base metals, or agricultural goods, projects to bring online expensive oilfields and alternative fuel sources are being shelved and will take years to get back on track. Mines are closing and projects are being canceled, thereby removing much of the supply; the credit squeeze is cutting down on agricultural investment, and working capital constraints will dramatically limit supply.
• The world’s demographics are not changing, nor are the aspirations of a hard-working, fast-growing middle class in emerging economies. The changes that drove commodity markets up for the last few years are long lasting and real.
• Peak Oil and peak-everything. There is limited supply for many commodities, and although there are alternatives (curbing consumption and finding alternative sources of energy), it takes large investments to do so. In current markets, many of these investments are going to be put aside until the next crisis/shortage hits – at which point we will have years of a commodities bull run before an equilibrium is reached.
• We anticipate that China, Russia, and India will take advantage of low commodity prices to secure very large, long-term supply commitments while the Western world licks its wounds and tries to recover. By the time we do, an even larger portion of the world’s available resources may no longer be available on the markets, for example oil and gas.In the last edition of Casey Energy Opportunities, Marin Katusa pondered how the U.S. is going to replace the supply of uranium when the HEU program with Russia is set to expire in 2013. The answer is that the U.S. will struggle to replace 40% of its needs, and this will benefit a handful of U.S. suppliers with proven reserves. Currently shares of these companies, which have the cash to develop resources or are already producing with positive cash flows, are incredibly cheap – a win-win situation. Eventually similar opportunities will come from copper and strategic metals.
• We can expect the world to continue to be a very unstable place, where regional conflicts can quickly spread and spin out of control, with obvious impact on the smooth supply of key commodities (Gulf region, Nigeria, former Soviet republics, to name a few). In fact, a widespread financial crisis could precipitate those events as conflicts are often linked to economic hardship.
• The unprecedented deficits, a wave of bailouts, and growth in the money creation by central banks in the Western world will eventually lead to massive inflation. In the U.S. alone, the monetary supply has increased by 50% since early September. This will unequivocally reverse the current short-term deflationary pressures and lead to a steep devaluation of the dollar and other major currencies. At that point, precious metals and all tangible assets are poised for a strong recovery.

So, if you ask me if I am still bullish on the resource sector, my answer yes, now more than ever. Juniors are juniors, and when things go wrong, they get beaten down. The strong ones with great teams and lots of cash will survive and prosper, the others will disappear. When commodities come back with a vengeance, there will be fewer companies, almost all with good projects… and those who are invested in these few companies will see a very sizeable appreciation of their capital as the broader public returns.

It’s very hard to be a contrarian investor, especially when all forces seem to be against you, but one thing the markets have taught me is that memory on the Street is unbelievably short, and they will come back.

Not only is the economy presently going haywire, there’s also still the boogeyman of Peak Oil looming on the horizon. While oil prices are at a low not seen for a while, it is all but certain that this sweet relief for motorists won’t last very long.

When oil prices come roaring back, the energy market will virtually explode… and,  if you are safely positioned in the right stocks by then, your bank account will too. Learn more about how being a contrarian investor can earn you a fortune – click here.

Source: Lost Principles

Traders await the results of OPEC’s emergency meeting on November 29 in Egypt and the regular meeting December 17 in Algeria.

“So far, it appears that the Saudis would prefer to wait until the December meeting before announcing cuts,” said Robert Johnston, an energy analyst at Eurasia Group. The Saudis, OPEC’s largest producer, have the most clout.

“However, a high level of compliance with the October cuts and the continued price collapse likely increases Saudi willingness to take on further cuts, whether in November or December,” Johnston added.

Analysts at Saxo Bank wrote that, from a technical standpoint, next week will be very important. “We will be watching $56 and more importantly $61 on the January WTI [West Texas Intermediate] crude contract as potential bullish indicators.”

Source: Crude Inches Higher, OPEC Meets in a Week

“The stock market has firmed up, which is giving the energy market some strength,” said Phil Flynn, of Alaron Trading. “It’s clear that an awful lot of bearish news has already been priced in.”

The Energy Information Administration’s weekly inventory report, delayed a day by the Veteran’s Day holiday, did little to move the market. Crude stocks were near-flat, rising by only 22,000 barrels, far below the forecast for a 1 million barrel gain.

But gasoline supplies rose by 2 million barrels, more than double the 850,000 barrel estimate.

The Organization of Arab Petroleum Exporting Countries, a subset of OPEC, is scheduled to meet in Cairo on November 29. However, non-Arab members of the cartel, such as Venezuela, Iran and Angola, will be invited to take part in talks about the oil market afterwards, OPEC President Chakib Khelil said.

And Brazil’s Petrobras has thrown open the newly-discovered fields off its coast to foreign Big Oil companies. Chevron and Shell expect to begin pumping in 2010, while Exxon, Mobil, Hess and Devon are engaged in exploration. It’s estimated that 50-70 billion barrels of oil could lie beneath Brazilian waters

Source: Crude Edges Higher, Brazil Welcomes Big Oil

“Bullish news today on top of the recent Chinese stimulus package and news of Saudi Arabia’s supply cuts failed to overcome economic concerns,” said Sucden Research analyst Michael Davies.

Among that bullish news was a report that militants are threatening to renew attacks on oil facilities in Nigeria. A few months ago, that would have automatically shoved the oil market higher. No longer.

Oil prices will likely “keep skipping along bottom here at the $60 per barrel range until we see the fully-implemented OPEC cuts and some winter demand data hitting the market,” said Neal Ryan, of Ryan Oil & Gas Partners.

And Mexico has reportedly hedged almost all of next year’s oil exports at prices ranging from $70 to $100. That stood in stark contrast to last year, when the world’s sixth-largest producer hedged only 20-30% of exports.

“This is a clear sign that they fear oil prices will remain below $70 a barrel in 2009,” said Kathy Lien, of GFT Forex. Lien added that “we doubt that they are the only oil producing country to start hedging.”

Source: Crude closes below $60 -  Mexico hedging like crazy

Phil Flynn, of Alaron Trading, responded to the Chinese news by calling it “a lot of stimulus that the market wasn’t expecting … It’s a two-year project, and it will increase energy demand from China.”

Flynn added that any gains may not be sustainable, though. “China has gone from having to slow their economy to having to boost it,” he said. “The market is still trying to determine the extent of the global economic downturn. In the meantime, we remain in a trading range, trying to break higher into the [$70 a barrel range] or breaking down in the $50s.”

The big factor is OPEC’s “pledge to cut production even deeper if prices are not in the $70-$90 range,” says Kevin Kerr, editor of Global Commodities Alert. “Giving that threat some teeth is the fact that the Saudis seem to be on board with the cuts.”

Kerr added that it’s clear OPEC is “fearful of an Obama presidency and what the longer-term impact to their industry will be,” and said the cartel will likely “vigorously defend the $60 level.” ”

Source:  Crude up slightly -  Drops below $60 but recovers

“Oil prices and [their] moves this year have reflected times of historic upheaval in the world economy,” wrote Phil Flynn, of Alaron Trading. This is “all about the price of oil adjusting itself to a new world economic order and the price of oil adjusting to the fears and the constantly evolving economic crisis.”

OPEC will have to be part of that adjustment, and the cartel is caught between the proverbial rock and hard place.

Mark T. Williams, of Boston University, notes that “the real story is how will OPEC react, and will they become more aggressive in restricting supply.”

Williams continued, writing of the cartel that: “Should they become more aggressive in supply quotes, how will this impact the economy? In particular, the global economy is vulnerable and such OPEC-imposed quota restriction could push the economy in even a deeper recession, further pushing down oil prices.”

Source: Oil Plummets Again, OPEC Caught in a Bind

Thus ended a record-setting month, with crude’s front-month contract plunging by 32.6%, the biggest monthly decline recorded on the Nymex since trading began in 1983.

“The oil market had the biggest change of heart since the tin man in the Wizard of Oz,” said Phil Flynn of Alaron Trading.

And Charles Perry, president of Perry Management, could only comment that, “I think we are all hoping for a more stable market in November, particularly after the election is over.”

Looking ahead, “Demand-side concerns are going to keep oil under pressure and we should find out soon just what price the Saudis want to defend,” said Michael Lynch, president of Strategic Energy & Economic Research. “Clearly, we are below the level that the price hawks, such as Venezuela, would prefer, but the Saudis have not publicly called for a restoration of higher prices.”

Source: Oil advances – But October was biggest losing month ever