The biggest news of 2006 was not an event but a condition, that of sustained high petroleum and natural gas prices. In the past most energy analysts who have looked at alternative fuels have stated that none would ever escape niche market status unless oil prices remained above a certain point, say $30 per barrel, $50 per barrel—the exact figure mattered less than the acknowledgment that price was ultimately destiny.

Now we have it from OPEC, no less, that the age of cheap oil is over, and if the market over the past twelve months is any indication, it is indeed over. There is no analog from the past for the current oil market. The future looks ominous, and the confident predictions of a dollar twenty-five gas some in the business press were making two months ago are heard no longer.

Does that mean that investment will flow into alternative fuel projects? In fact it’s already happening. Seven percent of U.S. venture investments went into alternative energy in 2005. Last year the figure was 15%.

That’s not enough to change the geopolitics of energy. A lot of that is going into ethanol and biodiesel plants, almost all of which utilize traditional production processes and expensive feedstocks. Subsidized high cost biofuels will not establish America’s energy independence and will not meet the growing demand for liquid fuels in the developing world. And thus the interest in other options will grow.

What else went down in 2006 of seminal importance? GM’s announcement of plug-in hybrids would seem to be seminal, but we are doubtful. More significant are the activities of an oddly named battery company called a123. They make a lithium battery that is more than twice as energy dense as a conventional lithium ion, and it’s already on the market and under the hood of at least one production electric car. That makes plug-in hybrids entirely feasible, and it makes pure electric vehicles practical for urban commuting.

What else is new and noteworthy? Thomas Friedman’s frequent articles on alternative fuels in the New York Times are highly significant. When a columnist that renowned takes up a new industry as a cause, that raises that industry’s visibility a lot. Friedman is too quick buy into the hype and extravagant promises that are the stock in trade of many alt fuel startups, but his interest in the area signals that alternative fuels are close to being mainstream.

What’s to come this year? We’re predicting the following.

Juice will be officially launched as of today, and will become the journal of record for the alternative fuels business. Here’s hoping.

Investment in ethanol and biodiesel will continue apace. Interest in feedstocks other than food crops will increase markedly as biofuel production ramps up and begins to impact the price of grains and edible oils.

Liquid synfuels derived from coal or natural gas will be much more in the news, especially if oil prices rise again precipitately. We also predict increasing interest in oil shale and bitumen. Coal and unconventional petroleum resources are fraught with environmental problems, and both extraction and processing technologies for these substances are somewhat immature, but the energy density of the feedstock is far greater than is the case with almost all forms of biomass, a fact which ultimately argues for superior economics of production. The key player here will be China. China already has billions invested in synfuels as compared to hundreds of millions in the U.S. If the Chinese synfuel projects pan out, then the world will take notice. There’s also the fact that a growing number of investment gurus are hyping synfuels. Hype brings in money, and money brings in more money.

You’ll find some of our other predictions in our editorial calendar for 2007. Generally, it represents what we think will be important in the industry over the next twelve months and where the industry is going.

What we can’t predict is political events, and in the energy business politics is paramount. If, as many political reports are suggesting, the Bush Administration attacks Iran in the year to come, that is apt to have a fairly profound effect upon oil prices, at least in the short term. What does that do to the alt fuels business? It would certainly heighten clamor for petroleum substitutes, but such substitutes only come into being when the investment community signals a willingness to dump vast resources into their development, which hasn’t happened yet. Web 2.0 is still far more important to most venture capital firms and investment banks than is alternative energy, and most financial types want to believe that the world will return to business as usual and stable oil prices.

We wish all of our readers a happy and prosperous new year, and we urge you to continue to stay abreast of developments in alternative fuels. We promise you that many interesting and important developments will transpire. And you can take that to the bank.