It wasn't too long ago that the big American carmakers ruled the global industry and owned most popular car marques. It was also not long ago that GM's Hummer was considered a status symbol in the United States and selling off dealerships at a faster rate than they could be assembled. But on July 12 last year the fate of Chrysler and General Motors was sealed when crude oil touched US$147 a barrel on the New York Mercantile Exchange, with commodities traders set to push the fossil fuel into unchartered territory heading towards US$200. A report from a top Goldman Sachs energy analyst was doing the rounds, warning that oil could reach US$200 per barrel by the end of last year. By July 17, the average regular petrol price hit an all-time high of US$4.11 per gallon in service stations all over the US. All of a sudden, petrol was no longer cheap for Americans and, coupled with a crippling recession, they realised the folly of owning fuel guzzlers that gave them fewer than 10 kilometres per gallon. With the credit freeze throttling financing and banks taking a battering after the collapse of Lehman Brothers, the big American carmakers were fast running out of cash to even run their day-to-day operations. Chrysler was the first to declare bankruptcy this year and General Motors, which not long ago was one of the biggest listed companies on the Dow Jones index by market capitalisation, followed on June 1. It was a stunning reversal of fortune for these two giants, even from the viewpoint of the most pessimistic of carmaker critics. With high oil prices continuing, President Barack Obama has made it a priority of his administration to push for green technology that will counter the dependence on fossil fuels. During the whole of last month, crude oil traded near or above US$70 a barrel. So the multibillion-dollar question now is whether green technology, such as biofuels from ethanol, wind energy and electric-powered cars, can replace the dominance of oil that has exerted a vice-like grip on stock markets around the world for the past five decades. The simple answer, according to analysts and others in the field, is 'no' for now. Jan Stuart, New York-based global oil analyst at investment bank Macquarie, says that alternative fuels such as ethanol biodiesel will be unable to match the use of oil simply because it cannot match the production and usage of the fossil fuels. 'The volume of oil used is enormous. The use of corn-derived ethanol is just 5 per cent of the petrol used in the United States,' Stuart says. Dong Tao, managing director for Asian economics (excluding Japan) at Credit Suisse, says that last year's high oil prices were a wake-up call for major nations to speed up the development of green technology. 'Governments all over the world have realised the importance of developing alternative sources of energy,' Tao says. He says the development of alternative energy in major oil-consuming economies, such as the US and China, has become popular as they face high oil prices and the global financial crisis. Public opinion in the US and other developed nations has been moulded by high oil prices, and consumers in these countries have no doubts that cheaper petrol for their fuel guzzlers is a thing of the past. A survey conducted in the US last year by WorldPublicOpinion.org found that 88 per cent of Americans believed that the price of oil would be much or somewhat higher 10 years from now. Just 7 per cent thought it would remain the same, while 6 per cent thought it would be lower. Unfortunately, the public was sceptical that the US government shared its opinion. Almost 57 per cent believed that the American government assumed that enough new oil would be found to allow continued reliance on oil as an energy source, while 41 per cent thought that the government assumed oil was running out and that it would be necessary to take action to replace it as an energy source. The stand taken by Obama of prioritising the search for alternative energy has gained him appreciation from Americans and researchers involved in finding solutions for popular use of green technology. Stuart says a lot of research and technology upgrading needs to be done before green technology can match the use of crude oil. Countries such as China have resorted to storing oil as an immediate solution to satisfying their needs for petroleum consumption. Beijing has said it would build vast storage facilities for oil, as the US has done. In the first week of June, Zhang Guobao, head of the National Energy Commission, said the mainland planned to be able to stockpile enough oil to cover 90 days of net imports. This would be the mainland's second phase of reserve bases to store oil. It would have a designed storage capacity of 26.8 million cubic metres, equivalent to 170 million barrels. Apart from this move, the central government has announced huge incentives to carmakers to develop cars with green technology. Two other Asian giants, Japan and India, have announced that they will create storage facilities for oil that will be operating by next year. Last year's oil price shock and the deepening recession from September last year have forced countries to cut back on oil consumption, which prompted a sharp decline in oil prices at the end of last year and the start of this year. According to Macquarie's research report, last year global oil demand fell 0.3 per cent year on year. This year, it has fallen 2.4 per cent. This is partly due to huge build-ups of oil inventories by major users such as the US, China, Japan and the European Union. Macquarie's report said oil inventories were already about 300 million barrels above normal and were still rising. Such unprecedented surpluses could take a year or more to work off, Stuart wrote in the report. One reason for the lack of competition between green energy and crude oil is the lack of funding for green technology. A venture capital manager based in Hong Kong says that the new oil shock of plummeting oil prices, at least at the start of this year, has had an adverse effect on alternative technologies and energy. Combined with the credit crisis, the fallout in some development of green technologies is shown by the difficulties in attracting capital and customers. 'One type of oil shock has given way to another. Even more swiftly than the price of oil rose, it has tumbled to a range that seemed far-fetched,' says the venture capitalist, who did not wish to use his name as he was not authorised to speak on funding. His fund invests in companies developing new technologies in the US and China by carmakers and other green energy companies. The venture capitalist says that the drop in oil prices threatens a wide variety of plans to find alternatives to oil or ways to drastically reduce US and other developing nations' consumption. 'The ongoing credit crunch is also compounding the threat by making it more difficult to finance capital-intensive projects,' he says. He adds that the uncertain future of electric cars points to a sticky aspect of the global oil equation. The price of oil can change rapidly, as has happened since June this year when oil prices recovered and now fluctuate between US$70 and US$78, but responses that will cut petroleum use take time. Despite this setback, carmakers are pushing ahead in developing new electric models for the retail market. In May, Chinese carmaker Geely Automobile Holdings said it intended to raise as much as US$141.9 million through a share placement to pay for importing new technology and increasing capacity at its mainland plants. Toyota Motor Corp said in January that it would launch an all-electric car for city commuting in the US by 2012 as part of its plan to speed up the introduction of green cars as global sales falter. The FT-EV concept car made its debut at the North American International Auto Show in Detroit in January, where the world's top carmaker also unveiled two new petrol-electric hybrid cars. Other Japanese and Korean carmakers, including Suzuki, Nissan, Mitsubishi and Daewoo, are also investing billions in new green technology for cars. Even the revamped Chrysler and GM have said they would be working on developing fuel-efficient and green cars once they emerge from Chapter 11 bankruptcy. But advocates of green technology are concerned that the incentive for utilities and consumers to buy expensive renewable energy will shrink if oil prices remain at a reasonable level. That is what happened in the 1980s when a decade of advances for alternative energy collapsed amid falling prices for conventional fuels. John White, executive director of California-based advocacy group Centre for Energy Efficiency and Renewable Technologies, in an interview with a newswire recently, said: 'Everyone is in shock about what the new world is going to be. Surely renewable energy projects and new technologies are at risk because of their capital intensity.' But, after years of rapid growth, the sudden headwinds facing renewables and green technology point to slowing momentum and greater dependence on government subsidies, mandates and research financing. The venture capitalist says he believes the long-term future for renewables remains promising, though 'right now we are looking at tumultuous and unpredictable capital markets'. Venture capital financing for some advanced solar projects and for experimental biofuels, such as ethanol made from plant wastes, is drying up, according to analysts who track investment flows. But the venture capitalist says that this may be because of the credit crunch and a reluctance on the part of venture capitalists to take risks. At least two wind energy companies have had to delay projects recently because they have encountered trouble raising capital. Several corn ethanol projects in the US have been delayed for lack of financing since last month, while one plant operator has filed for bankruptcy protection. But both Stuart and Tao believe that with oil prices slowly creeping up and with the recession receding by the fourth quarter of this year, the momentum for the alternative energy companies will pick up and financing will once again be available for these projects.