The Case For Human Ingenuity

Niels Jensen says oil is not a good long-term investment:

There are essentially three reasons why I think oil prices will go through a rather dramatic correction over the next several years:

1. Many investors who, in recent years, have added commodities to their portfolios as a hedge will ultimately be disappointed by the lack of diversification this asset class offers;
2. Governments and regulatory authorities, both in Europe and the United States, have effectively declared war on commodity speculators, and the area will become subject to a lot more scrutiny and regulation in the years to come;
3. A number of new alternative energy forms are in much more advanced development than many investors realise and will, over the next 3-5 years, become serious alternatives to oil, particularly as far as transportation is concerned.

He goes on to mention the Volkswagen XL1:

Earlier this year, at the Qatar Motor Show, Volkswagen unveiled a remarkable new car called the XL1 (see pictures here and more details about the car  here), which is expected to go into limited production as early as 2013. The car runs on a 0.8 litre hybrid engine (combined TDI engine and lithium battery) capable of carrying two people at a top speed of 160 km/h (100 mph).

The XL1 can drive an astonishing 110 km/l (313 mpg) and emits only 24 g/km of CO₂ in the process. As an added bonus, the car can do up to 35 km (22 miles) in battery mode, i.e. with zero carbon emissions. A lightweight body of only 795 kg partly explains the impressive performance. The car has been 13 years in the making and is by far the most fuel efficient car the world has seen to date.

I think there are tremendous opportunities to improve fuel efficiency, but that way too many people believe that there isn't a limit to the amount of oil we can consume.  I would think that diesel-electric cars with electric motors replacing a mechanical transmission could improve efficiency, and that there should be smaller, essentially one-person vehicles to replace larger cars which generally only carry one person.  Unfortunately, not very many people realize how much we actually spend each year on vehicles, fuel, insurance and maintenance.  I estimated at least $3000 per vehicle per year, and probably more.  That is a lot of scratch.