An Energy Policy That Makes Sense, Revisited

On April 4 (2008) I published my first energy policy here on Seeking Alpha. Oil was around $100/barrel. Roughly one month later, oil is up another 20% and now over $120/barrel; the US dollar is dropping like a rock; the S& P500 has done nothing in years, and inflation, food and otherwise, is high and rising. CEOs of major oil companies took the unprecedented step to publicly say at the World Economic Forum in Davos, Switzerland that worldwide oil supply will not keep up with worldwide oil demand by the year 2015. That is only 7 years from now. If oil prices are $120/barrel today (while oil supply and demand are balanced), what will prices be in 2015? Regardless, it is well past the time to take action. Yet still no word from the President and Congress on a real energy policy to prepare and protect America from the realities of peak oil. Why?

I again submit a comprehensive energy policy below. It has been updated with the excellent feedback I received from the readers of Seeking Alpha. I commend you all for your interest, intelligence, and passion.

Since the US has no real energy policy today, the time constraints enforced by peak oil will require our new energy policy to be correct the first time around. I suspect we will not get a second chance. Below is an outline of a comprehensive energy policy that tackles the challenges of peak oil head-on. It will require sacrifice and present many challenges to the people of our nation. It needs to be implemented with the urgency of a “crash” program, like the Manhattan project. We must be up to this task. There is no alternative to failure.

• The first step in an energy policy that addresses peak oil is to acknowledge the problem at the highest levels of government. No difficult problem can expect to be solved until it is first acknowledged. We need to make the words "peak oil" as prevalent on the lips of Americans as is "Britney Spears" or "Hannah Montana". Every citizen needs to know exactly what is at stake here.
• Although the policies listed below are, for the most part, Federal initiatives, it should be understood that state and local governments, including the association of governors, should be major role-players. They are best able to address issues like mass transit in their cities, power generation and transportation issues which are unique within their boundaries, and other similar aspects of an overall energy policy which are best dealt with at the state and local levels.
• Since transportation is a large component of imported oil usage (gasoline), we need to immediately increase tax incentives for highly fuel efficient vehicles. At the same time, we need to place *very* large penalty taxes on purchases of low mileage SUVs such as the Hummer. Yes, Americans are free to drive what they like, but if they chose to buy a vehicle that threatens America's economic prosperity and security they must be made to pay through the nose. The tax revenue from the sale of these idiotic vehicles will directly fund the tax rebates for fuel efficient vehicles. That way, if your neighbor drives a Hummer, you can thank him for helping to pay for your Prius.
• We need higher fuel economy CAFE standards passed sooner rather than later [as in NOW]. The recent legislation Congress passed on CAFE standards won't be fully implemented until 2021(!). Are you kidding me? The game will be over by then if we don't take more intelligent and immediate action. We cannot continue to let the US automobile lobby draft legislation governing mpg standards. Internal combustion engines should be required to satisfy the so-called “open fuels standard”. That is, they should be required to run on gasoline, ethanol, methanol, or any combination of these fuels.
• American automobile manufacturers must receive government incentives to design and manufacture alternatives to the gasoline powered internal combustion engine. The assistance received will depend on the quality and timeliness of delivery of said vehicle, be it an electric, natural gas, or hydrogen powered solution. The goal should be for the vehicle to have a range of at least 300 miles per fueling and be manufacturable by 2012.
• Such alternative vehicle solutions will likely be powered, in part, by electricity. We therefore need a massive governmen- led initiative to build out our non-oil and gas based electrical power sources and to update our electrical grid infrastructure. We need to free up natural gas for transportation and heating.
• Power sources that should be financially and otherwise encouraged by the government are nuclear, wind, and solar. We will need massive amounts of electricity from these sources, and we need to begin NOW. Nuclear plants require long lead times to license and build and we should have started yesterday.
• Ethanol is a losing proposition in my opinion. It has probably saved some oil, albeit at what cost? The cost of grains has skyrocketed, causing real inflation at the grocery store for everything from bread to beef and chicken. Also, with the affects of global warming, the water requirements of ethanol will become a real issue. Government should stop subsidizing ethanol and instead put these subsidies on wind and solar energy as well as building out the electrical grid. Besides, ethanol actually encourages further use of gasoline and in some ways gives American's the impression that it is the "answer" to higher gasoline prices. It is not.
• The US has huge coal reserves, but coal is dirty. We need more research done in the area of coal-to-liquids and coal gasification so that we can harness the energy in coal without destroying our environment in a cost effective manner. I don't know if that is possible, but surely we need to find out. Soon.
• The Federal government, the state of Alaska, and Canada, need to get off their collective duffs and commit to building a much needed, and long overdue, natural gas pipeline from the gas fields of Alaska and Canada to the lower-48. ConocoPhillips and BP have committed to building this (no Exxon participation?). Governments and industrialist should support this effort. Planning and construction need to begin immediately and be accelerated.
• Conservation guidelines should be issued by the government and local utility providers. I cringe when I see huge displays of Christmas lights which burn all night long. It makes me realize how clueless most Americans are and what a long way we have to go. We should be penalizing such indiscriminate use of power.
• "Alternative fuels" should be encouraged but only after careful study of all relevant data. Ethanol is an example where short-sightedness, simple analysis, conclusions, and "bandwagon" jumping can end up with failed policy initiatives which are harmful to the overall objectives of a sound energy policy. (I don't consider wind and solar to be "alternative" energy sources. Wind is economically viable today, and solar be shortly). Biofuels (cellulosic ethanol and methanol) surely have a significant role to play, but let’s not get emotional on the subject. Let the scientists and engineers make the call, not politicians. Geothermal should be utilized where appropriate and cost effective.
• We really need to evaluate our policy of not drilling for oil off the coasts of California and Florida as well as the existing drilling limitations in Alaska and elsewhere. These oil assets will take years to bring online, and we need to start NOW.
• We need to increase the tax on gasoline, not decrease it! I know this will not be popular, but we must discourage gasoline consumption. Meanwhile, the gasoline tax receipts should go directly to support wind, solar, and nuclear energy production.
• We need to develop electric mass transit for people and goods. The French have done it and power it with nuclear energy. The Germans have done it and powered it by solar and geothermal. The US again lags in energy policy. Aren’t Americans tired of falling behind Europe in terms of energy policy? Are Europeans really that much smarter than Americans?
• We need to encourage local sustainability in energy and food production. We need to encourage people to grow their own gardens, supply locally available solutions. We need to encourage population control both in the US and globally. Self reliance and frugality is required.
• Lastly, the citizens of the US must demand political leadership on this issue. As voters, we must make it clear that we will not re-elect politicians that continue to put the number one threat to US national security on the back burner. There is no issue that demands more political urgency than peak oil. Period. We need qualified and knowledgeable people to run for office on a platform that places an energy policy front and center.

These then should be the central themes of a comprehensive energy policy. The policy needs to be drafted in simple unambiguous terms. The tax policies need to be long term and phased in/out in a sensible fashion so that business can plan their budgets accordingly without having to worry about the outcome of the latest election.

Windfall profits taxes on the oil companies is an idiotic idea and counter productive. We have an oil supply problem, so tax the US companies that are providing oil? This is madness.

Now, my friends say, "Mike, what's with the nuclear solution, I thought you were an environmentalist?" Well, I am an environmentalist! Burning coal is simply killing the environment, period. CO2 is one issue, but the mercury being dumped into our water table is just as serious an issue to me. Anyone know the half-life of mercury? We have ignored peak oil for so long, we have no choice now but to license and build nuclear reactors as quickly as possible. Yes, I understand the issue of nuclear waste. That said, the Energy Department has been working on the technology to post-process spent fuel rendering it less hazardous. We should increase research and development of all stages of nuclear energy. Bottom line is this: we face such a huge energy crisis we will need all the non-oil energy we can get.

With respect to global warming, all I can say is this: peak oil has the ability to completely wreck our economy by the year 2015. Global warming, which I am in complete agreement with, does not have the power to wreck our economy for decades. So, which is the most urgent threat? Answer: Peak Oil. Now, the solutions of either address both, but I bring up the distinction because it is a question of priorities and urgency, If only people and media used the phrase "peak oil" as much as they do "global warming".

The longer the United States waits to address the realities of peak oil, the harder the task will become. If we do not act soon, it will simply be too late and we will suffer a decrease in our standard of living which, I can assure you, the American people are not only not ready for but can scarcely imagine. We are already beginning to see the affects of peak oil now. On the other hand, prudent action, while requiring sacrifice and hard work, can revitalize our country and usher in an entirely new era of economic prosperity. I certainly hope the next administration chooses the later path. You, the reader, can make a difference by speaking directly with your elected officials on the issue. Send them an email today with a link to this Seeking Alpha article. Remember, it feels good to be a true patriot!

I firmly believe peak oil will be the dominant investment theme of the next few decades. ConocoPhillips (COP), Schlumberger (SLB), Neighbors Industries (NBR), StatOil (STO), and Chevron (CVX) all remain favorites of mine. For mutual funds, I recommend that people stick with Vanguard Energy (VGENX), Vanguard Precious Metals (VGPMX), and Fidelity Select’s Energy (FSENX), Energy Services (FSESX), and Natural Gas (FSNGX). For high yielding energy plays in 401k plans, the Permian Basin Trust (PBT) and Hugoton Royalty Trust (HGT) are attractive. I continue to advise investors to stay out of the broad S&P500, US Bonds, and to have some US dollar hedges in your portfolio. In addition to the energy investments above, I think one should have some precious metals exposure in terms of gold and silver bullion or with the GLD and SLV ETFs.

Disclosure: The author owns all of the above listed securities except SLV.

Comments

[Global Warming Examiner]

I agree with most of your analysis. We really need a national energy policy that develops nuclear, wind, and solar.

The one energy resource that we have in abundance that is cleaner than coal is natural gas. Drilling technology has opened up very large shale deposits. Natural Gas could be a bridge fuel that could replace oil and coal in many applications thus reducing our need for more imported oil and starting to clean our environment.

How about developing cars and trucks that run on natural gas? New electric power plants will be built with natural gas as the fuel.

Eventually nuclear, hydrogen from nuclear, and synthetic fuels will dominate, but in the mean time I like the gas producers: APC, CHK, COP, DVN, ECA, EP, SWN, XTO. (I own shares of APC, CHK, COP and SWN)

2008 May 09 06:40 PM

[GMiki1]

Natural gas may be less abundant than we think.

Sad that we have no leadership in the government, which shows that politics and leadership are two different things.

I like microcaps in energy. At some point they will jump. I own DEJ, DNE, and Kodiak. Check them out. (I also own CXG in nat gas.)

2008 May 09 07:28 PM

[mikel]

Amazing how there are no engineers in politics or really at the top anywhere in this country. We are rapidly approaching a time when our fundamental problems are engineering problems and yet there are nearly no engineers in leadership. This can be seen in many plcaes, I am in werospace and we are failing because leadership just does not understand or respect engineering. What percentage of congressmen are practicing engineers? What percentage of CEO's?

2008 May 09 08:31 PM

[inyodog]

The $160 billion would have been better spent on the above instead of $600 rebates

2008 May 09 09:26 PM

[Brian Pursley]

Aside from raising taxes and drilling for oil I think most Americans would agree with your proposals on a bipartisan basis. However, no Conservative will support raising taxes on gas and no Liberal will support drilling for oil. It goes against the religions.

Another religion, the Peak Oil cult, is based upon the twin myths that (a) hydrocarbons are so-called "fossil fuels" and (b) hydrocarbons were only formed twice in the history of the universe. The existence and profitablity of a company named Transocean (RIG) should be the final nail in the coffin of the "fossil fuel" hoax. The enhanced Enterprise-class drillships will drill in 12,000 feet of water and to 40,000 feet total depth, more than twice as deep as the mythological biogenic "oil window" and
the deepest fossil ever discovered.

The Peak Oil movement is a political movement and not a scientific one. A high commodity price does not mean global oil production has peaked. 86 million barrels per day is more than the world has ever produced and that's just a fact. Peak Oil is therefore a theory, not necessarily a reality, and absolutely not a certainty.

Hubbert and Deffeyes both life long Democrats. If they had their way there would never be another oil rig contructed on the face of the Earth. They are like Al Gore now that he cashed out of OXY. Meanwhile he flies around in jets with an entourage of gas guzzling Secret Service SUVs and the most energy inefficient home in America.

Yes it's important to acknowledge all theories which is also why it's important to acknowledge the theory of abiogenic petroleum origin and the possibility that petroleum is not a finite resource. Hydrogen is the most common element in the universe and carbon is the fourth most common element in the universe. Think about that for a moment.

Disclosure: long NOV, RIG, PBR, & HAL ... =)

2008 May 09 10:03 PM

[Kezorm]

Reply to mickel98,

"yet there are nearly no engineers in leadership."

Yes, I know you said "nearly no engineers", but I thought I'd paste this link anyway:

bartlett.house.gov/Bio.../

Congressman Bartlett has been beating the drum about energy scarcity issues for a long time. I've seen him on C-Span and he is as knowledgeable as anyone about Peak Oil. Here is a link to his page on energy policy. (Note the Hirsch report, which is must reading.)

bartlett.house.gov/Iss...

Maryland should be very proud to be represented by someone with such excellent and varied credentials.

2008 May 09 10:05 PM

[frflyer]

If you want to see a sensible energy policy, go to
www.setamericafree.org...
A Blueprint For U.S. Energy Security

And your worried about taxing the profits of oil companies?
Why? We are already giving oil companies $80 billion a year in tax credits and subsidies, making the oil industry just about the lowest taxed industry in the country at about 8%.
And then there are the other hidden costs of oil, largely paid for by tax dollars. we are talking hundreds of billions annually.
All told, about $800 billion annually including the subsidies.
What isn't paid for in taxes, is paid in the private sector, one way or another. And there's the over $300 billion that oil adds to the trade deficit, and you can see that oil already is ruining our economy.
www.setamericafree.org...

By comparison, congress is offering $6 billion for next year for solar, wind, geothermal etc combined.

And take a look at this proposal to achieve 69% solar powered electric grid, by 2050, spending less in public money than was spent on the high speed information highway, over about the same time period.

Scientific American A Solar Grand Plan
www.sciam.com/article....

I would emphasize solar thermal plants more than the concentrating PV that this proposal does, but it shows what solar can do.

Solar thermal plants can store heat to generate power at night. Molten salt seems like the best storage medium, it holds 99% of it's heat for 24 hours.

Here's what one company says about their solar thermal power plants.

"Solar thermal power plants such as Ausra's generate electricity by driving steam turbines with sunshine. Ausra's solar concentrators boil water with focused sunlight, and produce electricity at prices directly competitive with gas- and coal-fired electric power."

"All of America's needs for electric power – the entire US grid, night and day – can be generated with Ausra's current technology using a square parcel of land 92 miles on a side. For comparison, this is less than 1% of America's deserts, less land than currently in use in the U.S. for coal mines."

To see what's already happening with solar thermal, go to Green Wombat, where there are several articles.

blogs.business2.com/gr.../

Transportation- plug in hybrids. The average American driver would get 100 mpg overall, doing most of their commuting on battery power, and recharging for $1 at night. Energy experts say the grid can already handle the nighttime charging.

www.pluginpartners.org/

Nuclear may be appropriate in some locals, for lack of anything better, but overall, nuclear is a really bad idea.

It's dangerous

The Argonne National Lab says that an airplance crashing into a reactor could cause a complete meltdown, even if the containment building isn't compromised. Remember the twin towers?

Nuclear plants can cost $500 million each to dismantle when they're worn out.

"Nuclear plant owners are responsible for costs to dismantle retired units, dispose of waste, and decontaminate the site. Each unit has its own decommissioning trust fund, paid for by customers. Wisconsin ratepayers have spent $1.5 billion for the eventual decommissioning of the Point Beach, Kewaunee, and Genoa plants."

Transporting waste from all over the country to Yucca Mtn. Nevada is not only potentially dangerous, but expensive.

"Part of our electric rates go to payments to the federal Nuclear Waste Fund, which is intended to fund the construction of the Yucca Mountain repository in Nevada and pay for transportation of waste to the proposed disposal site. To date, Wisconsin customers have paid about $600 million into this fund." That's just one state

Nuclear power has no accountability for safety.

"The nuclear industry has long enjoyed limited liability for nuclear accidents under the Price-Anderson Act, which ensures that taxpayers, not industry, will pay for damages in the event of a serious accident."

Nuclear plants are not only slow to get up and running, but are expensive to build.

"Estimates of the cost to construct nuclear power plants are as high as $4,000 per kilowatt, as compared to about $1,400 per kilowatt for wind projects."

Nuclear doesn't make us energy independent. We import 65% of our oil and 90% of our uranium.

www.cleanwisconsin.org...

"The United States and Russia signed a deal that will boost Russian uranium imports to supply the U.S. nuclear industry, the Commerce Department said Friday…."

"The new agreement permits Russia to supply 20 percent of US reactor fuel until 2020 and to supply the fuel for new reactors quota-free.
So if, under a President McCain, we build a bunch of new nuclear reactors -- they could be fueled 100 percent by Russia.
I can almost hear Vladimir Vladimirovich Putin saying, "Excellent." " gristmill.grist.org/st...

Solar and wind are quicker to get up and running than both nuclear and coal.

And solar PV at the cutting edge is already cheaper than coal.

"Nanosolar’s founder and chief executive, Martin Roscheisen, claims to be the first solar panel manufacturer to be able to profitably sell solar panels for less than $1 a watt. That is the price at which solar energy becomes less expensive than coal.
With a $1-per-watt panel,” he said, “it is possible to build $2-per-watt systems.
According to the Energy Department, building a new coal plant costs about $2.1 a watt, plus the cost of fuel and emissions, he said."
from www.grinzo.com/energy/.../

Americans are being fed a bunch of dis-information about the supposed limitations of solar and wind. Large industrial interests, who want nuclear, coal, more oil, etc are distorting the conversation.

We are told that solar and wind are too intermittent. That hasn't been a problem for Denmark, which has 20% wind power.

"There are areas in Denmark and Germany who use more than 40 percent of their electricity from wind. From what I have read, they are less concerned about the intermittency than we are in the United States even though we aren't at 1 pecent yet. Why? Because we are told by the fossil fuel guys, hey, can't use wind, can't use solar, what about the intermittency. If wind gets up to 40 percent of the electricity we use and solar gets up to 40 of the electricity we use, the other percents of electricity we need can be made up from the fossil fuel plants that are still there. If they are run less at full power, they can last a long time. That can be your electricity `battery.'"

gristmill.grist.org/st...

And it isn't stopping Abu Dubai.

"Abu Dhabi is not content to just sell you the oil that fuels your SUV; now its going to sell you sunshine to keep your lights on and power your electric car when the internal combustion engine goes the way of the buggy whip. Masdar, the oil-rich emirate’s $15 billion renewable energy venture, and Spanish technology company Sener on Wednesday announced a joint venture called Torresol Energy to build large-scale solar power plants in Australia, Europe, the Middle East, North Africa and the United States."

They are eying the same American southwest, where the proposal in the SciAm article recommends that we Americans build solar power plants.

"The irony is too rich to leave unsaid: A leading oil producer invests billions in carbon-free energy while a leading consumer of fossil fuels - the United States - continues to subsidize Big Oil while offering only tepid support for green technology. It is inevitable that climate change will foster the rise of renewable energy - the only question is which countries and companies will profit from the new energy economics. It is entirely possible that the U.S. will trade energy dependence of one kind - on Middle East oil - for another - on Middle East and European solar technology - in the era of global warming. It’s no coincidence that most of the solar energy companies with contracts to build utility-scale power plants in California and the Southwest have overseas roots - Ausra hails from Australia, BrightSource was founded by American-Israeli pioneer Arnold Goldman, Solel is based in Israel and Abengoa is headquartered in Spain." from Green Wombat

"The greatest obstacle to implementing a renewable U.S. energy system is not technology or money, however. It is the lack of public awareness that solar power is a practical alternative—and one that can fuel transportation as well. Forward-looking thinkers should try to inspire U.S. citizens, and their political and scientific leaders, about solar power’s incredible potential. Once Americans realize that potential, we believe the desire for energy self-sufficiency and the need to reduce carbon dioxide emissions will prompt them to adopt a national solar plan"
from the SciAm article above.

2008 May 09 11:17 PM

[dynamicduo]

There is always the mass transporation that people push. That presents a problem to those who would use it since the 'stations' of the transportation would probably not be convient to the desired desination of the people. How about small electric cars (or carts) that are rented at a nominal price? How about trucking companies, i.e. FEDEX and UPS sign up to consign local deliveries and ground shipping to these mass transportation vehicles.
How about some of the auto manufactures get real and present vehicles lighter in weight with smaller engines? That is how Europe responded to the higher fuel prices that were presented to them. There is an entrepreneur who presently is presenting a 3-wheel car (motorcycle) that carries 3 people and has a trunk for purchases. The inovative part is the engine which runs on Compressed Natural Gas and gets about 70 miles per hour. Why don't you present this type of fix and show the oil companies what you think of them, or, are they going to sink something like this like GM quashed the trolleys and red cars in southern California? And, the were only fined about $6000 for doing it but they got their gas burning busses on the streets of LA.

LOOK IN THE RIGHT PLACES!!!

2008 May 09 11:29 PM

[Michael Fitzsimmons]

thanks for your comments. as usual, the author like to make the comment section a two-way conversation:

wrt natural gas: the lower-48 and canadian production trends are not encouraging. that is why it is important to build the nat gas pipeline from alaska to the lower-48. also, i keep forgetting to mention LNG terminals in my energy policy - we need to license and build more of these! new york recently denied an application, and don't you know they will be the first ones to complain when nat gas prices begin to take off like gasoline prices are now. we need to be able to import LNG on both east and west coasts. i did mention nat gas as a transportation fuel. boone pickens is focusing on nat gas fleets, where the refueling infrastructure is more feasible. honda has a nice nat gas car, and there is a fairly cheap adapter owners can attach to their nat gas lines at home to refuel it. read about it here:
automobiles.honda.com/.../

pursley: so, the fact that the peak oil theory was predicted, and has been verified, for the largest oil reservoirs in alaska, the lower-48, the north sea, and mexico mean nothing to you?? the facts are this: currently worldwide oil production is ~85 million BPD. now, out of this, worldwide production must find an additional 4 million BPD of NEW oil every DAY just to keep up with the depletion rates existing fields to STAY at 85 million BPD. sure, there have been some elephant fields discovered lately (the first in a long while...) by chevron in the gulf, and two in brazil. however, all three of these fields are in deep water, deep rock, far from shore and existing infrastructure, and will take technology not existing today to bring into production and delivery. this will take 5-10 yr minimum. by that time, depletion rates at existing large reservoirs will be even greater than today. meantime, demand in china, india, russia, and the middle east will continue to grow. i mean, are you serious? this is a "liberal political conspiracy"? what are you smoking? actually, maybe you should smoke something. please, go online and look at the production rates of alaska's prudoe bay. also check mexican production at the cantrell oil field. check also north sea production depletion rates. not to mention the first verified peak oil theory, the US lower-48! man, get a clue. sorry to be so harsh, but you are so blinded by ideology you forgot to check your facts.

2008 May 09 11:42 PM

[Michael Fitzsimmons]

frflyer: thanks for your comments. wrt taxing the oil companies, i agree they no longer should get the tax breaks and subsidies, they can easily fund E&P on profits. that said, some of the proposals now are to tax "windfall profits", and this makes no sense. the oil companies have a responsibility to their shareholders, so they will simply cut back on E&P and we'll get less oil! since the US has started so late on a comprehensive energy policy, less oil will make the economic impact that much harder. this is bad policy. besides, what about profits at google? health care? let's tax it all. bad policy. we need more oil, and we should be drilling more, not less IMHO. it's not fair to tax oil producers when the real failure has been the US governments lack of an energy policy. this is what has made the oil these companies produce so invaluable! if we're going to tax anything, tax the gasoline like europe does. now you are actually doing something to discourage indiscriminate gasoline usage, promote conservation and alternatives. that is the tax that should be levied. it should be gradual, and increase over time so citizens and policy makers can see exactly what is coming in the near future and plan for it.

you talk about 2050 for an electric grid...man, we don't have that much time. sure, we need to plan for the future however, the CEO's of conocophillips, hess, and shell have all spoken publicly recently and said worldwide oil supply/demand d-day is 2015 (!). from the work i have done, i see no reason to doubt this, and if anything, i think it will happen earlier, perhaps 2013. if oil is $125/barrel now, what will it be in 2015? we are facing economic chaos very soon! that is why on a scale of urgency, peak oil simply dwarfs global warming and alot of other concerns, including your concerns on nuclear. i used to be against nuclear too. the bottom line to me is if we fall into economic chaos, it won't matter how "green" things are, it will be a very dangerous world to live in. that said, you don't have to sell me on solar, wind, geothermal - any alternative, i'm sold man!! we will need them all! however, just a back of the envelop calculation of the energy needed to replace 25 million BPD of oil at peak oil depletion rates - i mean think of it - we will need ALL non-oil energy sources, a huge buildout of the electric grid, and yes, nuclear to refuel the plug-in autos. the real problem here, from my view, is one of urgency. we simply started too late, and the last 8 years have been critical, and a total loss. had we made more progress to this point, perhaps i would go back to being anti-nuclear. at this point, i don't see that we have any alternative since the amount of energy needed is so huge. that said, i'm not even sure we can get new nukes online in time. it has just been a total failure of leadership by the US government when it comes to an energy policy. one thing is for certain, we have no time to lose.

chuck: i did mention nat gas powered transportation, as well as electric cars and electric mass transporation. why are you bangin on me man? i am on your side. in my previous articles, i mentioned Project Better Place's electric car work in israel and denmark. i mentioned boone picken's company that supports nat gas powered fleets. i mentioned honda's nat gas auto. i have looked in the right places...

2008 May 10 12:08 AM

[ART005]

Very good article. And actually I don't think the status of Peak Oil really plays into the message. If supply of oil is organic and destined to be less and less then the problem is huge and hence the urgency descibed. If supply of oil is inorganic and not likely to decrease much going forward then still the growing demand creates the urgency described. The price of oil is market driven and maybe speculators have added a premium but none of the petroleum industry is a bubble that is going to just pop back to happy prices. If this is the inorganic plateau then it's still an economic problem.

Time is a commodity we can't make more of. All viable solutions need to be pursued, "pick lowest hanging fruit" with conservation being one that can be utilized immediately.

Help spread the news............

2008 May 10 12:44 AM

[JREwing]

Any politician who proposes a policy, that makes transportation more expensive won't get elected dogcatcher. Not even here in Germany. That was alright in the 90s when gas was cheap. Now including taxes I am paying 9$ a gallon, and suddenly folks a crying for a tax relief even here in 'ever green' Germany.

Fact is, people don't want to see the problem, and anyhow, it is much easier to pull a 'COMMY' and blame the oil companies.

Your points are well taken, FITZ. I commend you on your thought process. But: People won't buy it.

Here is how I think this is gonna play out.

First, I don't want to play the arrogant European here (We got a lot to learn from America/and we are only free peoples because of you guys),
but 3.51$ a gallon is so cheap, I just can't believe it. Every time I go on vacation, I usually go to the US, and I rent the biggest damn car there is (funny enough: last summer I was Dallas and rented a HUMMER)- because it is paradise for me.

So, before people really, really gonna start to think about this is, when gas cost 9 or 10 bucks a gallon.

It is the pain and nothing but the pain, the sheer necessity to change behavior, that brings change.

Darwin really got that right. Poetry socialists may like it not: In the end everything has to adapt to a changing environment or go under.

As long as gas is cheap - and don't get me wrong, it is cheap here in Europe as well, otherwise people wouldn't drive around in their convertibles for fun on a nice day like this - Detroit will figure it is more important to NOT get tough with their union buddies, instead of investing in R&D, Airlines will continue to ask their Unions for permission to become more profitable in order to buy at least on or two planes, that are up to date, when it comes to fuel consumption and so on...

Interesting, that the industries with the biggest need to improve are union dominated.

Bottom line: The market will take care of this. Should there be any government intervention, it will be aimed at the symptoms not the cause and will therefore be counterproductive.

Drive Diesel and save fuel!

2008 May 10 06:02 AM

[ozzy43]

While your diagnosis is relatively accurate, the course of treatment you prescribe is an exercise in fantasy, relying as it does on government to 'do the right thing'. In doing so, you mistake the nature of the beast. It has been government which - by offloading such externalities as air pollution from businesses onto taxpayers, and by implementing legislative, regulatory and judicial and even military protections (you didn't really think we were in Iraq to promote democracy did you???) in favor of the oil companies - is largely responsible for the current sorry state of affairs.

Government is NOT an agent of the people - it is NOT "an institution of social service" or even "an amiable, though often inefficient, organization for achieving social ends" (Rothbard) - it is, by and large, as Albert Jay Nock put it, "a distributor of economic advantage, an arbiter of exploitation", or even more damning, in Rothbard's view "it is the systematization of the predatory process over a given territory. ...The State provides a legal, orderly, systematic channel for the predation of private property; it renders certain, secure, and relatively 'peaceful' the lifeline of the parasitic caste in society."

This is the entity to which you wish to turn for solutions? It will never be what you think it is, and therefore will never behave as you wish and hope for it to behave. Because this would be precisely contrary to its very raison d'etre. You are assuming a grizzly bear is a cute stuffed teddy bear. That's a lethal mistake.

Therefore, your proposal is at its core, fatally flawed.

2008 May 10 10:12 AM

[charliep]

I am a farmer. If we drop the ethonol policies now we will again break our farmers. Fertilizer cost are directly related to oil prices. Ethonol is not the reason for high grain prices. Oil is. But it is very popular to blame ethonol for our high food prices. Oil is. My cost for fertilizer and fuel has tripled in three years. I do agree with peak oil breaking america because this country runs on petro procucts. we need new soures of energy now. I also agree that ethonol in not the answer but it helps keep U. S. agriculture healthy. The number of people the planet can support is a finite number that we are rapidly approaching.

2008 May 10 10:21 AM

[ozzy43]

A note on the "theory" of abiotic petroleum origin from Wikipedia:

The most important counter arguments to the abiotic theory involve various biomarkers which have been found in all samples of all the oil and gas accumulations found to date. The prevailing view among geologists and petroleum engineers is that this evidence "provides irrefutable proof that 99.99999% of all the oil and gas accumulations found up to now in the planet earth have a biologic origin." In this process, oil is generated from kerogen by pyrolysis. While, Thomas Gold hypothesized that bacteria exist deep within the Earth's crust, and are the source of the biomarkers, these bacteria have not been found, the natural abiogenic formation of high-carbon hydrocarbons has not been demonstrated, and evidence for the biotic origin of petroleum is abundant.

This can only loosely be classified as a theory (speculation would be a better term, or untested hypothesis), and it is one without any evidence whatsoever, whereas the standard view of petroleum biogenesis - which the vast majority of geologists hold - offers innumerable proofs. To hold the two up as peers is disingenuous to put it politely. It is yet another exercise in fantasy, intended to allow the holder of such a view avoid dealing with the unpleasant reality of peak oil.

2008 May 10 10:28 AM

[Ronmac]

ozzy43, thanks for the rational explanation. Brian Pursley, you are going to be very shocked in the the years ahead...get ready. Your "theory" is about as logical as the "rain will follow the plow" cult that has helped us overpopulate the western deserts of the US...

2008 May 10 12:10 PM

[User 145964]

Trust our government to properly allocate another tax??? When will people like you wake up.

2008 May 10 12:23 PM

[silver-bullet]

Michael hit the nail right on the head. I believe he speaks with ground level experience, and his advise should be well heeded. I also suggest folks will check out the 2008 May 10 audio cast in the following link:

www.financialsense.com...

The comments and views seem circumspect of our current economic and political environment, I strongly recommend this web site for any serious investor, or even anyone who wants to have an unbiased view on current affairs.

2008 May 10 12:24 PM

[Ronmac]

User 145964...I completely agree with you. Our government will take whatever taxes they can and mis-allocate them as quickly as possible.

2008 May 10 12:30 PM

[romorris]

Forget "building out the electrical grid". Distributed power generation is the way to go. The grid is profoundly inefficient and lose power over every mile. Small localized power plants that have the efficiency of the current very large ones should be used. Fuel Cell are a natural tie in here, as are solar and wind.

2008 May 10 12:57 PM