Energy and technology were the main ingredients in sparking the Industrial Revolution. The availability of risk capital, advances in technology, an available labor force, and access to energy were the enabling agents of economic growth. Energy from our recent history was assumed available while technological innovation led to rising stock market values. Technology trends such as wireless communications, the Internet, and advances in semiconductors have dramatically changed our lives.
The following provides an overview of energy and technology as it relates to economics and investment.
Back in the 1600, wood was fuel and used for building tools, homes, and transportation, and when shortages developed, prices rose dramatically. Before coal could be adequately mined, deforestation in Europe led to economic turmoil.
Our economy is built on energy and technology drives the stock market either through new products and markets or process improvements to drive costs lower companies that use technology.
Figure 1 Technology and PE Ratios
The growth in the demand for electricity is growing faster than population growth. The U.S. spends most on oil accounting for 33% of the global oil.
Figure 2 U.S. Historic Energy Spending
The U.S. imports over 12 million barrels of oil per day and even with dramatic improvement and adoption of fuel-efficient vehicles and ethanol use, we are vulnerable to energy shocks. The real issue is the energy gap in the U.S. continues to widen with more oil being supplied from foreign countries.
Figure 3: Oil Consumption and Production
Our energy bill is over $869 billion and that was in 2004 when oil was under $30 per barrel. In the U.S, our spending on energy is increasing faster then the growth in our population.
Figure 4 World Electric Generation 
Oil and its by-products are used primarily for transportation, but are found in numerous industries such as plastics and film. The widening gap between supply and demand leaves the U.S. vulnerable to oil shortages and supply disruptions.
Figure 5 Coal Consumption
As China has begun to modernize its economy, demand for coal has increased significantly over the last decade. China is the largest producer of coal and its appetite for coal increased 9% per year over the last five years in comparison to its population growth of 1%. China’s demand for electricity rose 12% per year over the same time frame. According to the Energy Information Administration, in the U.S., 49.7% of our electric was generated from coal in 2005. On a global basis electric from hydrocarbon fuels is 82%.
Figure 6 Electric Use per Person
The continuing increase in the price of oil, driven by supply constraints and growing demand influence other commodity prices. Remaining known oil reserves are close to reaching peak production. There have not been significant new oil finds in the last couple of decades. The new oil finds lie deep within the ocean or in harsh artic climates, which makes extracting that oil much more expensive. In addition, despite higher oil drilling rig counts, domestic oil productions continues to decline.
Figure 7 Electric Generation 
Coal accounts for 49% of utility electric generation in the U.S., while is China, coal accounts for more than 80% of electric generation. Alternative energies such as solar and wind energy are still a small fraction of electric power. The problem with coal is its higher carbon content in relationship to hydrogen. Fuel efficiency is determined by the ratio of hydrogen to carbon. The higher the number of hydrogen atoms in comparison to carbon the greater the efficiency of the fuel. Coal has twice the amount of carbon molecules than oil thereby adding more CO2 emissions.
The two things to watch are commodity prices driven by oil and adoption of new technology.
Figure 8 Oil and Gold Prices
Alternative energies such as solar, wind, and fuel cells are some of advances that could ameliorate our energy dilemma and provide economic returns for investors.
Figure 9 Alternative Energy
