Implementing Pickens' Plan for Public Energy Policy 61 comments
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First, let me applaud T. Boone Pickens for putting all this energy, time and money into a very important issue. His plan is to use wind power to replace 20% of the US electric grid, freeing up natural gas to be used in the US transportation fleet. First lets recap a few points of Pickens' to ponder:
- US oil production peaked in the 1960s and 1970s.
- US oil production is now at 5 million barrels a day, the lowest output in over 50 years despite record real prices - the US consumes over 20 million barrels per day.
- The US consumes 25% of the world's oil, with only 4% of its population.
- The US will send $700 billion dollars out of the country per year to buy oil.
- Projected over the next 10 years, the cost for oil imports will be $10 trillion — the greatest transfer of wealth in the history of mankind.
- World oil production peaked in 2005 at about 85 million barrels per day.
Much of the $700 billion the US spends to buy foreign oil does not go to unstable countries. Canada and Mexico are two of our largest suppliers. But billions of dollars do go to countries that may fund anti-US activities. Bottom line: $700 billion is leaving the US economy.
How has the US boxed itself into this nasty oil corner? The answer is the power of the monopoly. Over the past 100 years the US has built (with tax payer dollars), an enormous vehicle transportation infrastructure based on only one energy source - oil. This oil infrastructure monopoly will not allow competition, as the barrier for entry is just too high.
Free market systems no longer work with a publicly funded monopoly in place. We already have many cheaper alternatives to the oil based vehicle. One can fill up a natural gas vehicle for under $2 a gallon. Electric vehicles cost less than $1.50 to charge.
Eventually economics will force the US energy vehicle infrastructure to move away from oil, but during this time we are putting ourselves at a huge national security and economic risk. A small conflict in the Middle East could close the Straits of Hormuz for months. This would not only create huge price jumps in oil products but create fuel shortages and rationing that would send the US into a long-lasting depression.
We can not dig or drill ourselves out of this problem. T. Boone Pickens has been saying this for over a year. The only result will be a bigger to crawl out of. Almost every drilling rig is in use. Drillers can't find workers to work on their existing projects. Listening to many energy conference calls, I hear the same thing: There are no workers available for this type of work. Here are some recent comments from Stacy Locke, CEO of Pioneer Drilling, a San Antonio-based contract land drilling company:
The labor market is extremely tight for all energy personnel. It is extremely challenging. You can't just hire a truck driver and make him a tool pusher.
A tool pusher, the top hand on a drilling rig who supervises the crew, is the worker most in demand. In the past, it could take a rig worker 10 years to rise to the tool pusher's job. Working up from floor hand to derrickman to driller could take five years.
The crux: more oil exploration, or real investment in alternatives for oil?
We are now at the crux. The US could try and build new rigs, train new workers, and spend huge amounts of money for more oil infrastructure, or the US could spend that money and focus to move vehicles away from oil, and create the infrastructure for renewable energies such as solar, wind, biofuels, and non-oil infrastructure creating American jobs and stop sending $700 billion to foreign countries.
Should the US open up more offshore areas for oil and gas exploration? This should be on the table as part of a REAL US energy policy. But as discussed above, this will have almost no effect on global oil prices as we do not have any more spare oil infrastructure to increase supply. Another reason more drilling in the US will not effect pricing are the concepts of net reserves, and well to wheel efficiencies.
Concept of net reserves
This is very important. Everyone should watch the move "There will be blood". It depicts how digging for oil works in a free market system. The easy oil gets sucked dry first. Back then, oil would just explode into the sky. Now we need to pump millions of gallons of water down the hole to bring up an ever shrinking amount of oil. It takes a lot of energy to pump water around.
60 years ago, it may have taken 1 boe(barrel of oil equivalent) to bring up 100 barrels of oil. That a 99% energy efficiency drill ratio. So the net reserve of that well would be 99% of the total recoverable amount. Now to get that 100 barrels out of the ground it may take 50-100 boe to extract, a 50% or less ratio. So actually reserves figures are meaningless, its the net reserves after you calculate the boe to extract the oil.
I am actually worried about negative energy drill ratio's. It is very possible we will see more energy used than the energy content of what is extracted. How can this be? Simple - natural gas is used to drill, and pump for oil. Since the price of NG is less than 50% of the price of oil based on energy content, we could be losing energy and still making economic profits. This scenario is devastating for the US energy picture, as we could be throwing away a precious US resource - natural gas.
Well to wheel efficiencies
This is an important concept when discussing a comprehensive US energy policy. In most studies, the electric engine is twice as efficient(full cycle) as the oil based combustion engine. This means the US will use half as much total energy, and reduce pollution by half if we move to electric engines. With the above economics of net oil reserves discussed above, this huge efficiency benefit from alternative engine types(electric, and NG) will continue to increase, as oil extraction requires more and more energy.
Pickens' plan implementation
His plan calls for natural gas vehicles, but electric vehicles may be an even better idea. From a free market approach, the US should not try and pick which alternative engine will be used. The US should just make it so the current oil based engine is not used, and let economics decide which is the best replacement. There are two methods that could work in a 10-15 year time frame.
US mandate
A simple mandate could be as follows. By the year 2015, no new vehicles with oil based propulsion systems, are sold in the US. By the year 2022: no vehicle oil based fuel at filling stations. During this time, the US could start a vehicle recycling program to help lower income drivers switch to the new vehicles.
The energy consumption tax approach
Shift away from income taxation into energy taxation. This would actually be a tax reduction plan. Income tax avoidance is growing, and now is 20% of the economy in my opinion. This 20% illegal underground economy currently pays very little in taxes. These tax cheaters will now pay more taxes.
By shifting to gasoline taxes - US workers will have more disposable income after paying these new energy taxes, since their wage taxes would be reduced by more then they pay in new consumption taxes. The US could set the gas tax as follows:
Set minimum gasoline prices:
- 2009 - $5.5
- 2010 - $6.0
- 2011 - $7.0
- 2012 - $8.0
To offset the regressive nature of consumption taxes, the US could change the wage tax structure. Currently, low income earners pay 15.3% SS wage tax, and since the tax stops at around 100K, high wage earners pay a much smaller %. A new structure could be the first 12K of w-2 with a zero SS tax rate, then 15% up to 150K of w-2 income. With the above consumption tax revenue, the income tax rates could be lower at all levels.
I think the US should use both methods concurrently. With the new minimum gas prices, the alternatives would finally be funded from the private sector. The fear of the oil infrastructure, and lower oil and gas prices once these alternative get funded has stop any real funding in the past, and will continue to do so in the future. By setting the minimum price to the consumer, new companies will be funded, and stimulate the economy.
Investors insight
This plan will benefit the natural gas stocks. If we use natural gas vehicles - demand goes up. If we use electric vehicles, the grid would need more feedstocks like natural gas, so demand goes up. Also wind farm production would help steel stocks that sell into the power generation area. My favorite equities based on the Pickens plan are:
- Apache (APA)
- Devon (DVN)
- Chesapeake (CHK)
- Provident (PVX)
- Enerplus Resources (ERF)
- XTO Energy (XTO)
- Universal Stainless (USAP)
Disclosure: The author currently owns USAP.
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This article has 61 comments:
You are correct in saying that the US (government) shouldn't try & pick. But, the government also shouldn't impose dollars more in taxes. (your price chart is scary!) If there is a scarce resource, like oil, in a free market, the price will go up to where it is valued by the consumer.
I'm already seeing people make significant life-style changes: where they live & work, how they get to work, where they shop, and what they do for entertainment. Let's not encourage the government (that as you pointed out, contributed to getting us into this situation in the first place) to start making bets on what fuel is going to be the "best."
Instead, the government's role should be to GET OUT OF THE WAY. Quit taxing or subidising. Quit regulating and setting standards. When people want fuel efficent vehicles, they will be produced & sold. When driving an Escalade or Hummer get's unbearably expensive, people will buy a Vespa or live within walking distance.
At least I do agree with most of your stock picks. NG will be a bigger and bigger component of the solution. Solar and Wind will be big winners, too. How 'bout a couple of suggestions in those sectors?
Check out tesla motors:
www.teslamotors.com/
0-60mph in 3.9 seconds. The torque from the electric engine is much higher. Trucks can run on an electric engine imho, if not then lets us biodiesel or synthetic bio from CTL, etc...
If anyone can show us why non-oil based engines can't work for big rigs - please post some info or links....I know diesel fuel can come from non-oil feed stocks....
Thanks for your comments. Please read my article again - I am proposing at tax decrease for workers. Increase in pollution/gas taxes, with an even bigger increase in take home w-2 pay with the change to the SS tax, and all income taxes lower.
This shift from income taxes to consumption taxes has about a 20% gain since we will be taxing the underground economy, and not honest taxpayers.....
Currently the use of gasoline creates an enormous amount of pollution in the US - and many health problems for individuals, and our water and air. Check out the US health care cost just associated with air pollution. Then you will see these REAL costs have never been incorporated into the price of the polluting products.
This is the concept of negative externalities:
en.wikipedia.org/wiki/...
Very good article !!!
The flaw with your escalator gas tax scheme is that which politician even whispers such an idea can kiss their political career good-bye.
Remember Jimmy Carter.
The tax idea works if you look at Europe where fuel prices are twice the US rate. Look how well their public transit system is used.
I say Drill,Drill Drill. Build Nuke power plants. natural gas cars, solar power, Coal. Lets do them all and may the winner stand up!!
Mr. Ellard the one concern I have about electric engines is range. I , like you, am an avid outdoorsman(I would like be out hiking right now instead of in front of my keyboard but hey its earnings season and its time to harvest), as such I spend a lot of time in my 4wd pickup far from any conventional fueling stations.So far, I have yet to see any electric engine with a decent range that will get me out to the backcountry and let me roam. I don't see that kind of problem with a nat. gas engine.Thus my own self interest would favor the nat. gas solution.
I like your concept of well to wheel efficiency,never thought of it that way.In this regard piping cng or lng to refueling staions rather than trucking gas would seem to be a benefit,but I wonder how that comparison would work out when pipeline construction costs are factored in. Also what are the energy and site requirements for compression/liqueficat... facilities vs. oil refineries and the potential output of each?
The important thing that has changed is that in the last five years, hughe new natural gas fields in the US and Canada have been opened up with new drilling and completion technologies. These new gas reserves have the capacity to run all our vehicles currently running on diesel and gasoline for at least the next twenty years and eliminate most of our current oil imports. This would still leave enough gas for electric generation and would give us a bridge to other technologies still in development. CNG combustion still has some pollution but it is less than gasoline or diesel and there are no liquid fuels to leak from tanks and pollute the ground.
For vehicle conversion and manufacture info search for "BAF Technologies" and "ngvc.org"
Hi Riley;
I fully agree. Let economics pick the winners. But you need to add back in the cost of pollution to those energy sources that pollute - well to wheel.
If you don't add in the pollution costs, then the markets are not fair or free markets. Wind, solar, geothermal, CTL, bio fuels, natural gas, electric engines - are all economically disadvantaged because the polluting sources - Oil, coal - are basically subsidized since they don't pay for the pollution they produce......
Nevertheless, our US democracy does not respond to logic! Voter interest and support is needed to move politicians, and the voting public does not understand or care about this. They will support the politicians with the high sounding promise. They will not voluntarily support higher gas prices.
How do we, and Boone Pickens convince the politicians that this plan would gain votes? How could we win the public support neccessary to make such a major change in the tax laws? Who will support the extreme (voluntary) increase in fuel prices?
We do have plenty of oil, and we could (if needed) import experienced workers and rigs with ever higher wages. Company profits can be (and will be) applied to training workers as needed.
The suggested changes presume that we will respond to logic and sound planning. In reality the economy and the business world respond to the market. To the extent that social planners and tax manipulaters mess with the free market they always screw it up.
Maybe some politicians will try to be rational but most will respond to special interests and perceived voter interest.
Good plan, but I doubt we can plan our way out of this mess.
People (many of the commenters above) need to get past their political biases that color their view of the world. It's a whole different world now than even just a few years ago. The laissez-faire approach will cause more chaos than a smart directed policy. I'm conservative but I see the huge problem we face and if we don't move together as a nation, with smarter policies that SHIFT US INTENTIONALLY AWAY FROM FOSSIL FUELS, we'll be sunk. As it is, it is already a huge enough challenge that even if we could all get on the same page today it would still be difficult to avoid massive repercussions.
If we don't buckle down and voluntarily apply some short-term pain (relatively speaking; it could still be years or even decades), then we are in for some real long-term hurt.
I like the idea of shifting taxes away from income and onto fossil fuels. Some will say this will stifle economic growth. Earth to La-La-Land! It's being stifled already and if we don't manage the situation, not only economic growth but even economic SURVIVAL will be crushed. On the flip side, taxes on income also stifle economic growth, so by shifting from income tax to fuel tax we are just moving sideways, but with beneficial side effects (getting off our crack addiction to oil).
If we had plenty of time, I'd agree that a free-market solution would be best. But there is no longer time. And the market needs direction; in the past, oil set the direction for the market; but currently no single player or technology is big enough to give direction to the market. The result is that the market doesn't commit itself to a coherent course and instead tends to wander and waste time. How many alternative technologies were lost, or companies went under, because oil was too cheap for several decades after the 1970s? If we had followed through with a national policy that gave those technologies and companies a chance, we could have been fully prepared for this day already. More than that, we could have been exporting these new technologies to the world, instead of sending all our money overseas for a dinosaur of an energy source that has no future.
Pickens' plan is a great step in the right direction. I happen to think there are a few naive assumptions in it, but it will be much better than doing nothing (our CURRENT non-strategy). The main flaw is assuming that natural gas will continue to be abundant, and the second flaw is to fail to account for fluctuations in wind power production (at least, as far as I have examined his plan). These fluctuations become important the more wind power you use. It needs to be complemented with grid-scale energy storage solutions.
It's time to shift our thinking. We need to recognize oil for the precious, limited resource it is... there are certain things it does which we cannot feasibly replace yet. Instead of using it up as fast as possible at the cheapest market price, and then crashing our civilization when it is gone, we should be carefully managing it for both the present and the future. All possible uses of oil that can be replaced with renewables, should be replaced, as soon as we can. We need to leave some oil in the ground for future generations, for those uses for which we have no practical substitute for oil.
Hick;
Fast charge electric devices have been around for years. Service stations could be fitted with such devices. How long will you have to wait for a complete charge? I do not know 10 minutes? - but I know how greed works in our economy - this would be a huge infrastructure change with 50-100 billion dollars at stake - it will get done!
And remember, we currently spend 700 billion buying oil from other countries!
They will support paying $200 bucks more in gas a month, if they get 300 bucks more a month in take home pay. That is what my tax plan is all about.
You are correct - the fear mongers will just scream about the high gas prices.....we need to combat this.
Thanks for you thoughts. The move from income taxation to consumption taxation will increase productivity and the economy. Income taxes are a disincentive to create wealth, and an incentive to cheat......
Also these energy taxes will create a huge amount of high paying jobs. Venture capital firms have the money - but will not fund alternatives yet. - This money - 100's of billions is waiting for a comprehensive plan that will allow renewables to compete on a level playing field.
Just changing out the service station to have NG, and fast charge electric would be a huge boost to the economy.
The sentences used to be mostly wise sayings or homilies. One of them which I still remember was: NECESSITY IS THE MOTHER OF INVENTION. Quite cute and true! But only till yesterday. Today invention usually runs against economics and economists, sometimes of the phony sort. This species called economist will justify anything, even, however bad, using his science of economics. Fequently hidden personal benefit often at the cost of others, the environment and even global warming is the real hidden agenda behind these economic analyses.
Our celebrated author of this piece has thrown us a very marvellous opportunity to hash out some ideas (if possible!) by propounding the wisdom of T Boone Pickens on the use of natural gas. Of course, being myself always somewhat on the weird-side, I can't help thinking that perhaps the middle name for the gentleman should be changed to Bonehead. However, I did not and shouild not do such a thing, even though I have been brutalized by those sellf-serving ads on TV for the last several days. Only for the sake of civility I shall not!
Now, about the wind thing. It is being done in many parts of the world, and, of course, should continue despite the distraction introduced by T. Boone. Even when it is somewhat (not too much more!) costly, it should be done. Why? Because among many phony obstacles, justified mostly on economic grounds by those who are gung-ho for fossil (coal, oil and even gas) based power/energy, hidden fraud appears to be the bias on the use oif fossil fuels. The votaries of economics almost always assume that apples and oranges are the same. Coal, oil and gas based power (or other uses) appear to be assumed as having the same effectiveness so long as they can satisfy the same end, or have similar economics. This kind of economic analysis is actually nonsense! For example, there are health costs associated in the use of each of these fossil fuels. In the case of electricity production, these costs may not be borne by the utility company or the investor, but nonetheless they are real costs. They are borne by the individual (in terms of disease and personal costs), or the government or society at large.
How about the costs (in future mostly) on global warming induced by fossil fuel use?
Now coming to the use of natural gas for diesel and transportation as proposed by T. Boone. Should we be adopting this model, even if economics can justify it? The efficiency of conversion of natural gas to diesel is only about 50%. Are we forfeiting a large part of the advantage (in terms of global warming) on the use of natural gas through such a model vs use of natural gas in pother situations without injvolving conversion to diesel? Why not a natrual gas engine for use in trucking, heavy vehicles, and other public transportation needs? It has been done and is being done in some parts of the world with excellent results. Good economics and improved environment in central cities. And also not tough to set-up a network of stations to provide compressed LNG to the commercial transportation industry. Excellent concurrent benefits in terms of public health. Granted, it is not practical for private small transportation vehicles (i.e. our cars). However, use of such an approach in heavy public transportation would save us lots foreign exchange. And the economics would be excellent compared to that on the use of natural gas based diesel or oil per se.
What do we do with coal? Forget about power plants run on combustion technology. Wherever suitable coal supply is available, use integrated gasification combined cycle (IGCC) technology. For base-load plants, we can get 45% efficiency now using IGCC (vs. 42% for coal combustion). 2 or 3% improvement in efficiency translates to 5 to 7% better over combustion technology! Nothing to sneeze at when you look at it in termsof the modest Kyoto proposals.
Many analyses performed in the past show that costs are actually better for IGCC if you factor in health costs. Almost zero pollution in the case of IGCC, and this technology can also spur the use of CO2 isolation and storage (sequestration) in future. Of course, this will have to await feasibility of undergrouind storage for CO2 in future.
Can gas be used in a better way as such without resorting to conversion? Yes and no. The subject is broad and it would be confusing at this point to cloud our contention that T. Boone Pickens doesn't have much to his proposals or contribution at this time. Perhaps, he wants to make a fast buck or two more before he leaves. Serious approaches to solve real problems in credible real ways take a long time. It takes more serious and perceptive minds and souls to do so. But first there must be a national will and a strong public consensus on the need to do so. The time is not right yet! Otherwise, nobody would be side-tracked by light-weights like T. Boone Picken.
I have some of the natural gas stocks mentioned above in my portfolio. However, I have no desire to make more gains with ideas like diesel!
Brahm;
I do not understand what you are talking about - no one is talking about NG to diesel conversion? Also if you read the article, I am not proposing the NEW alternative to oil based engines - my view is let energy efficiencies and real free markets(include all cost - pollution) decide the winners.....
1) There are too few Nat Gas stations. This is a big problem but could be resolved fairly quickly for most locations as demand increases since many areas already support an infrastructure of Nat Gas. I am primarily limited to driving around town or I have to make sure in advance there are stations in the areas that I am driving too. This is a hassle.
2) The range on most Nat Gas vehicles is substantially less than gasoline. The maximum that I am able to drive is about 175 miles on a full tank. Its not too bad but can be a problem when there is a substantial distance between pump stations.
All in all, I would buy another Nat Gas vehicle but I would probably buy a bi fuel. The cost savings is significant. In my situation (I mostly commute to and from work) I am saving about $250 to $300 per month. The cost of gasoline in my area is $4.15.
Most cars could be converted without too much difficulty although the present cost seems to be from $5K to $7K which is significant. The conversion cost could be reduced as more shops are certified for conversions. Most auto manufacturers have stopped producing Nat Gas vehicles. I believe that Honda is still producing the Civic Nat Gas. Longer term, we need to look for other alternatives but I believe that Nat Gas could offer the best short term viable solution... all things considered. Even though we have all heard of this alternative, most don't understand the advantages/disadvantag... of this option. Until we become priced out of gasoline we will not undertake the effort to become educated.
I don't think you get what I mean about range.
I don't mind waiting 10 minutes for a charge but that charge has to last me 300 miles-in 4WD.That means a lot of power.Go out to Utah Badlands/Canyonlands or Flattops wilderness in Colorado.You don't find gas stations behind every elk! Also think of power consumption when you're hauling a four horse trailer.Electric will not get you there and back.Granted these are a few extreme examples but how do people get their boats out to Lake Powell? Ever travel I-70 through Utah? There's a 160 mile stretch with absolutely no services.
What I'm saying is that electric would kill a lot of the Outdoor rec industry if range didn't increase dramatically.You also have to remember that outdoor enthusiasts require a lot more power,on average from their vehicles.You want to put electric refueling stations out in the boonies, you have to start stringing a lot more power lines.
20 years ago I spent a month in the flattop mtn - great trout fishin. I am sorry about the range issue - I did not understand the query.
Go to the Tesla web site - I think the range is over 250-300 per charge, and that is for a high performance rig.
You could have an truck and bring with you a thin film solar system and charge up in the backcountry!
Also we could have bio-diesel - I use bio-diesel right now in my Golf tdi and get 50 mpg.
Any diesel vehicle could run bio-diesel, but if these vehicles were designed and manufactures for bio-diesel - they would work even better.
On the subject of private cars and natural gas, I am afraid that it has been sort of dismissed as being impractical . It presents a lot of safety issues as well. Ever thought about basements and houses blowing up when piped gas (at even low pressure) is used for heating? How about mass public places blowing up, where natural gas is filled up for cars or cylinders installed, if such a model were to be adopted? Or cars blowing up in crowded public places when a car has been fitted with malfunctioniong gas cylinders/controls/gad... which may be leaking. Expect every car-driving American to become an expert in handling gas at moderate or high pressure? Did T Boone say anything about this? I bet not, whether I am mistaken on what he meant on natural gas use for transportation.
As I have said, mass public or commercial transportation (trucking, buses, perhaps trains, etc) are excellent candidates for natural gas susbtitution. And, the infra-structure for these would not be expensive because we don't have to put up a filling station in every locality.
We actually have a tough time to set up pipelines for natural gas transmission across the country. If all private (cars) transportation were to be switched on to it, it would perhaps be a formidable 100 year problem to evolve an adequate infrastructure.
The $2/gallon equivalent for gas is speculative. It probably does not include transmission, distribution and marketing costs. (Current gas price (bulk does not include transmission, distribution, etc) is about $11 to $13 per 1000 cu ft (or per $7 million Btu). The equivalent for gasoline is about $23 on the East Coast at the gas station. Still think $2 dollar equivalent for gas is possible! How about if OPEC drives the price of the barrel to $100. Or, the market in gas gets so tight because of mass demand that it kicks up the price of gas to a current equivalent of about, le's say, $17 at the hub in Kansas(?)/Louisiana?
The intermediate term solution for private automobiles, in my most thought-out view, is more small cars, hybrids, electric cars with much highher mpg average standards thyan prevalent now. We can cut consumption 30 to 40% using this approach within 10 years. Of course, we need to bring this to start immediately, using incentives/disincentiv... including severe tax implications if necessary.
I will check again! I don't know how to reach you beyond today.
"T. Boone has been pushing is diesel derived from NG" I don't think this is the case - and again I do not wish to pick the winner - let the market work.
Some in the US are paying less than $1 a gallon for NG, not diesel from NG......
Pickens is subtly highlighting the need for a new infrastructure to support adding renewables like windmills in rural / out of the way locations. Using the size of the US (and possibly Canada and Mexico too), wind will be blowing somewhere all of the time and those windmills can supply energy to where it is needed - if we can ship it efficiently. A national (international?) grid would benefit everyone (rural and city) but due to the expense and size of this massive project, it would take the US Gov. to fund and expedite. And voters resolve!
When I look at adding the monthly cost of fueling my car to the ROI for solar panels (in Los Angeles), it drops my breakeven period from 14 years to 7. Electric cars are looking better and better.
This approach takes advantage of ever improving efficiencies of wind turbines and photovolatic solar technologies. Take a look at the dramatic improvement in power generation with each generation of windmill (going back to 1995) and follow that trend out 5 - 10 years into the future. Pickens is using 6 MW windmills. With a national grid and supporting policy, groups / cities could fund adding a windmill in a remote rural location to pay for their power usage.
To Maurice: We're finding much more gas than we're extracting. In 1990, the Potential Gas Agency (the experts on the subject) estimated that America had 1100 trillion cubic feet (Tcf) of recoverable gas resources. Since then we've produced and used 300 Tcf. Last year, the Potental Gas Agency estimated that America had 1500 Tcf of recoverable gas resources. As technology improves and economics change, we keep finding more gas. Google "gas shale". It's very excting.
To gadgethound: Natural gas vehicles are better for greenhouse gases, but their not zero. The Caliofrnia Energy Commission recently reported that natural gas vehicles produce 22% less greenhouse gases than diesel vehilces and 29% less than gasoline vehicles.
To Brahm: Yikes! Where do I start. Pickens is NOT proposing diesel fuel made from natural gas. He's proposing the direct use of natural gas in light-, medium- and heavy-duty engines. As to safety, natural gas is safer than gasoline. If gasoline was not yet a vehicle fuel and you tried to introduce it today, it would not be possible. Too dangerous. We just are use to and accept the dangers. Look at it this way, we already use natural gas for vehicles, but no one uses gasoline in their homes for cooking and heating. As to an infrastructure, America already has 1.6 million miles of gas lines bringing gas to every major population area in the country. As to price, when gasoline is $4.00 per gallon, it is selling at $32.00 per million Btus. Natural gas is selling about $12.00 a million BTU at the wellhead. That's $1.50 per gallon equivalent. Add $1 for transmission, taxes, compression, and profit. $2.50 is much better than $4.00. Also note that natural gas is sold as a "gasoline gallon equivalent" or 124,800 Btu. Because almost all gasoline is now blended with ethanol (which has less energy per liquid gallon), a gallon of gasoline is no lionger 124,800 Btu. The more ethanol, the less energy in a gallon. So, natural gas is providing more energy and at $2.50 per gallon.
To bones33: Boone Pickens is 80 years old and a multi-billionaire. He's given away to charity over $700 million. Maybe he actually believes that America has a big energy problem and maybe he actually believes that he has a plan that will work. Keep in mind that both wind power and natural gas vehicles are here-and-now technologies. Neither requires major technical breakthroughs and neither requires a decade of lead time. Maybe we ought to use the tools we have today rather then hope that a silver bullet answer magically will come along some day.
For what possible reason would the word "and" appear in that sentence? The infinitive form of the verb "build" is "to build", not "and build"......same as any other verb.
I would love to be truly apples/apples here... presently I am skeptical, but am open to going through a fair spreadsheet on the subject.
> jack
All trains use electric motors. They are the best powerplant for high-torque applications. In the fullness of time, I expect to see fuel cells replace diesel power, but over the short term, we will probably see a lot of truck traffic shift to rail (that's why Warren Buffett has been buying rail stocks). There is the possibility (one would have to do some detailed design calculations to be sure this is feasible) of a GM Volt-style powertrain for trucks, with a diesel generator producing electricity for the electric motor drive train, augmented by batteries & regenerative braking for stop-start driving. my guess is that we could see mileage improvements of around 10%-20% for trucks using technology like this.
He doesn't get sidetracked off on some social issue like Social Security Taxes for lower incomes and try to cure that with funds created out of energy use. Next you'll hang health care as a % of pump costs--talk the thing to death and qualify as a True Blue Socialist Politician!!
The Pick has a good idea!. Get behind it and support it as it is!.
The last thing it needs is a third "Legion" of Do Gooders trying to figure out how to siphon off some of it's efficiencies.
> jack
Thanks for the info on NG supplies and the use of CNG in trucks.
Here's an interesting aside on the "value" of tax subsidies as regards CNG vehicles. A new CNG powered Honda GX sells for $4,000 more than its hybrid cousin, although it's cheaper (...about the same cost as a standard Honda Civic) to produce. Coincidentally, perhaps, the federal tax credit for buying a GX is exactly $4,000, which goes directly into Honda's pocket, not yours! So much for the benefit of government tax subsidies for encouraging consumer behavior.
While I believe you and I are essentially on the same page as regards our energy crisis, I'm not sure you're being totally fair to TBP. While he's changed his mind about wind farms, so has the rest of the nation changed its views on domestic energy exploration (...except for people like you, me and TBP, who were for it all along).
Last week he I saw him respond to a question before a Senate committee by saying he changed his mind about opening up ANWR, and that he's for it now. That could hardly endear him to those Liberals, or help get their support for his wind-CNG plans, either.
You might want to consider giving him in a break on this one.
No offense, but you obviously didn't get my point about the value of CNG vehicle tax subsidies to CONSUMERS. If MANUFACTURERS raise their prices to pocket such subsidies for themselves, as is clearly the case with the Honda Civic GX, why have them in the first place?
The Honda Civic GX does qualify for the federal tax credit of $4,000, but Civic GX sells for $5,000 more than its gasoline twin. NGVs inherently cost more than a gasoline vehicle. The biggest difference is the fuel storage tanks. Gasoline is stored in an inexpensive rigid plastic bag. Because natural gas is stored at 3600 psi, the tanks must able to handle twice that pressure for safety. That's not cheap. Also, most US vehicles use Type 4 tanks. They're much lighter than the all metal tanks but they are more expensive. Honda had the higher incremental price even before the tax credit went into effect in 2006.
Thanks for the fascinating post about United Oil, and the tremendous oil and gas reserves off the coasts of Alaska and South Carolina. I have no doubt there are virtually ENDLESS supplies of these resources all around America offshore, enough to power our economy for HUNDREDS of years by themselves.
Indeed, world renowned astrophysisist Thomas Gold believes we have only scratched the surface, and there could easily exist more than 100 TIMES the oil and gas reserves we have previously discovered. That would pose severe problems for both the Arabs and the Greens, both of whom are vitally dependent on the theoretical nonsense of Peak Oil.
Years ago the cost of a CNG conversion from a gasoline powered engine was $1,000, and today I'm told it's around $3,000. But in mass production that doesn't account for the $7,000 price difference between a Civic GX and an LX, or how the GX could cost even more than the Hybrid, which must be significantly more expensive than the GX to produce.
Thanks again for the CNG truck info. Let me ask you, would it be feasible for long haul truckers to utilize CNG (...assuming they could readily refuel), and what are the cost differences? I know they work for trash hauling trucks today, and I rode in CNG powered taxicabs 25 years ago.
This is also why gasoline prices are retreating now. I've maintained for months that gas prices would recede when Congress actually takes action to increase domestic energy reserves. Wall Street sees that happening now.
But I wouldn't short oil just yet. So far, the Greens and the Democrats are digging their heels in. This means we can only end the offshore exploration moratorium in October, when the Senate Republicans can keep it from being renewed for another year.
So stay tuned, it promises to be one hell of a fight!
I've got a cousin who was a RABID hunter (think in terms of the Rockies for elk/dall sheep, Michigan UP for black bear, etc...whatever was in season. His "hunting vehicle" was a 72/73 Suburban w/ 350 V8. It had the "over size" 40 gal. gas tank, and he converted it (or had it converted), adding CNG capability. His range with that monsterous fuel hog was 650/700 miles, and it could be switched from one fuel to the other "on the fly", merely by flipping a switch under the dash.
old trader
Anytime an expansion of government powers is proposed, I go back to a more principled examination on what our government should be allowed to do. Fixing prices, mandating particular items be used (or not used) are a power I wouldn't want a government to have, as they are certain to be abused. Additionally, most free market inhibitors have unintended collateral damage.
Many of the goals of this article can be accomplished without ceding powers that can be abused by government nor limiting the free market.
Here are my recommendations:
1) Enact a cap and trade program for harmful pollutants
The price for power needs to incorporate the cost of pollution. My preferred way would be through a cap and trade system that limits particular pollutants, such as carbon dioxide. Over time, the overall limits on these pollutants decreases, making the permits to pollute more expensive. This would guarantee that the price paid for any fuel reflects the pollution it generates. The use of oil would incorporate higher and higher permit costs as time goes on.
2) Remove all the subsidies and tariffs on fuel
That means the tariff on Brazilian ethanol goes away, as does the subsidy on corn based ethanol. Any subsidy for oil production needs to be removed. This will level the playing field. Fuels compete on how much they cost to produce plus whatever permit costs for the pollution they produce.
3) Government assistance to spur investment in fuel alternatives
This one I'm somewhat unsure of, but I'd be ok with the government providing resources to accelerate private enterprise to solve important national issues. In this case, perhaps its further funding of private research in the area of fuels or sponsoring contests to accomplish specific goals (ie a battery powered car that can go x miles, etc).
My plan would ensure that our pollution decreases to a desired level and that the market decides what fuel to use.
Anytime an expansion of government powers is proposed, I go back to a more principled examination on what our government should be allowed to do. Fixing prices, mandating particular items be used (or not used) are a power I wouldn't want a government to have, as they are certain to be abused. Additionally, most free market inhibitors have unintended collateral damage.
Many of the goals of this article can be accomplished without ceding powers that can be abused by government nor limiting the free market.
Here are my recommendations:
1) Enact a cap and trade program for harmful pollutants
The price for power needs to incorporate the cost of pollution. My preferred way would be through a cap and trade system that limits particular pollutants, such as carbon dioxide. Over time, the overall limits on these pollutants decreases, making the permits to pollute more expensive. This would guarantee that the price paid for any fuel reflects the pollution it generates. The use of oil would incorporate higher and higher permit costs as time goes on.
2) Remove all the subsidies and tariffs on fuel
That means the tariff on Brazilian ethanol goes away, as does the subsidy on corn based ethanol. Any subsidy for oil production needs to be removed. This will level the playing field. Fuels compete on how much they cost to produce plus whatever permit costs for the pollution they produce.
3) Government assistance to spur investment in fuel alternatives
This one I'm somewhat unsure of, but I'd be ok with the government providing resources to accelerate private enterprise to solve important national issues. In this case, perhaps its further funding of private research in the area of fuels or sponsoring contests to accomplish specific goals (ie a battery powered car that can go x miles, etc).
My plan would ensure that our pollution decreases to a desired level and that the market decides what fuel to use.
After advocating allowing market forces to work to help us out of our current energy crisis, you propose a series of government programs to accomplish these goals. Perhaps you see the contradiction in that?
But, don't worry, after Obama's elected, you'll get your wish. There will be PLENTY of new government programs for energy and everything else.
That is false. "Nature, Not Human Activity, Rules Climate Change". A report by this title that can be downloaded from sepp.org
The popular notion, that seemingly has become a religion with many people, is that human activity is behind global warming. This idea is being pushed by the UN's Intergovernmental Panel on Climate Change - IPCC. Its members are paid by their governments to participate in this activity.
Most of us citizens who have read about the IPCC and its reports would think that its objective was to determine if human activity was causing global warming. But that is not the case. The IPCC was established in the early 90s by the UN as an activist enterprise from its very beginning. Its agenda is to justify control of greenhouse gases, especially carbon dioxide. Consequently, its scientific reports have focused solely on evidence that might point toward human-induced climate change to the exclusion of evidence to the contrary. And the IPCC has not only ignored evidence to the contrary, but worse yet, its leadership has doctored reports to support the leadership's view that human activity is causing global warming.
A group of 31 internationally known, unpaid, volunteer climate scientists met in early 2007 to produce a truly scientific and balanced report that examined what was known about the science of global warming and cooling. This group called themselves the Nongovernmental International Panel on Climate Change - the NIPCC. Their report has now been completed and can be found at this web site: sepp.org under Publications.
[If you are concerned that I may be overstating the case against the IPCC's reports, see paragraph 3 on page iii of the Preface to the NIPCC report (the reference to which is found below) that is written by Dr. Fred Seitz, the recently deceased President Emeritus of Rockefeller University, the Past President of the National Academy of Sciences, and the Past President of the American Physical Society.]
When you read my summary, you may want to read Singer's and Avery's book available from Amazon and other bookstores. The main focus of that book is to present the historical evidence that the earth's climate is being affected by a 1500 year cycle of global warming and then cooling caused by periodic variations in the sun's output. The most recent temperature minimum for the earth was in 1850, and is referred to as the Little Ice Age. We are on an upswing in temperature now known by climate scientists as the Moderate Warming Period.
The NIPCC report has as its objective the presentation of a balanced view of the data on cooling and warming and its sources. What they found is the opposite of what the IPCC and the media are promoting. To quote from the Conclusion of the NIPCC report:
"It is regrettable that the public debate over climate change, fueled by the errors and exaggerations contained in the reports of the IPCC, has strayed so far from scientific truth. It is an embarrassment to science that hype has replaced reason in the global debate over so important an issue."
seia.org/
I would buy this car as a communter if they can make it.
zeropollutionmotors.us...
I can certainly see how it might appear contradictory, but let me explain.
While item #1 does give the government additional power, which I would in most cases object, it is needed in order to establish a price for an externality, namely pollution, that so far has no price. I go by the mantra that the government should only get involved in situations where private organizations cannot handle it themselves. In this case, I don't see any other way of establishing a price for pollution other than having a central agency involved. Although the government is involved, it is assisting with a solution that harnesses the power of the free market.
I assume you weren't talking about #2, as that is removing government involvement.
As for #3, as I stated previously, I'm not totally sold on this idea. Is it ok for the government to provide benefits (such as cheap lending, tax breaks, etc) to encourage particular types of activity? Its already done with student lending, small business loans and incentives for businesses to locate somewhere. However, private enterprise can already do this, and usually will do a better job vetting ideas because they have money on the line. Ok, I'll strike #3 off the list. Once #1 is in place, the economics for clean energy are there to encourage investment.
Also, in the early 1970's, I bought Mesa LP Preferred stock, which was a T. Boon Pickens company. For every 100 shares I purchased at $15 per share, I ended up with 8 shares worth $8 apiece, due to a reverse stock split. All the while, T. Boone was making a big salary, nice bonus money, and riding around in a corporate jet. Ever since, I have called him T. Boone "Pickpocket"!
Watch out for his promotions! By the way, he is wrong, we can drill our way out of energy problems. For you doubters, just how did we get dependent of oil if we didn't drill to produce it in the first place?
Pull your heads out!
My Company Arctic Oil & Gas, (AOAG) recently offered Santa Barbara County residents $2.50 gasoline and $1.50 CNG and hundreds of millions in royalties, if they let us develop proven oil reserves of 250 - 500 million barrels in the SB channel and land 1 trillion cubic ft a year of gas from my Bering sea gas project. And we offered to convert cars to CNG.
So far no one seems much interested. Americans would rather send their entire national wealth to our enemies!!!
See; www.strategicnine.com/...
Other companies hold leases suspended for 30 years with 2-3 billion barrels of proven oil reserves. This is just over a small stretch of California coast.
OPEC-Russia will own every major American company within 6 years at current oil prices. Your kids will have to work for them!!!!