Kiss our Grits OPEC

T. Boone Pickens has a plan. Thank God someone does. A plan for what you ask. Well, Boone Pickens is going to free us from the clutches of OPEC and foreign oil. He’s going to save us from ourselves and those evil arabs. I’m sounding a bit sarcastic here, and I don’t really mean to. His plan’s not that bad and, unlike the politicians who are “running” the country, at least he put some serious thought into it. There are just a few sticky points with it that make the hair on the back of my neck stand up.

First, let’s remember that Boone Pickens is first and foremost an oil man. Even the hedge fund he manages, BP Capital Management, invests mostly in oil and gas. So, it’s not like he doesn’t have a vested interest in limiting foreign oil incursions into our market. However, he is serious about his plan and he’s willing to put some of his own money where his mouth is. That speaks volumes.

But, to start with, I want to pick a point with him about something he said on FOX News a few days ago. Mr. Pickens made the comment that the $145 per barrel price that’s being paid on the spot market for oil is totally a function of supply and demand. Now, if you compare my bank account to Boone’s, you’d probably think that my opinion about oil prices doesn’t carry anywhere near the weight of his. Generally speaking you’d be right. But, I grew up in oil country with pumping jacks in my back yard too and I’m going to tell you, that dog don’t hunt.

When you look at world oil supplies and world oil demand over the past twelve months, there hasn’t been enough shift of either metric to justify the meteoric rise in oil cost. There is an outside influence affecting price. Actually there are two. One is the weak dollar and the other is speculation.

Commodity traders have built an oil bubble by blowing hot air into what should have been a manageable rise in oil prices. That’s actually a good thing. If the price was high solely because of supply and demand, it would take years before our efforts to move towards alternative energy sources would have a downward effect on the cost of oil. However, speculation is mostly psychological. If you give commodity traders a reason to believe that the ride is coming to an end, they’ll poke that bubble in a heartbeat. A comprehensive, effective energy plan could do that.

The dollar problem is another issue. That’s not going to get solved quickly. Despite the fact that dollar trading is psychological too, we need to actually make progress on the economy and the banking crisis before that improves significantly.

But, let’s move on to the specifics of Mr. Picken’s energy plan. Basically he wants to replace the $700 billion dollars of foreign oil we buy with something we can produce domestically. Good goal, how about we look at the details.

Wind Power

Boone is a big proponent of wind power and this is the area he’s willing to pony up the money to grow. Now, he’s the first to say that he’s not doing that out of the goodness of his heart. He’s planning to make some serious money on his investment. That’s OK, profit is good. Without profit, business isn’t going to invest and to make any plan work, business has to invest. Boone is planning to build the world’s largest wind farm in the Texas panhandle. His farm will be able to generate 4000 mega watts of electricity. That’s equivalent to the output of four coal fired plants. Mr. Pickens wants corporate America to follow his lead and dot the landscape from Texas to North Dakota with similar farms. All in all he estimates that 22% of the county’s electricity needs can be met this way.

Works for me. The only questions I have are (1) will corporate America cough up the one TRILLION dollar capital investment that would be needed to get this done and (2) can the government and electric companies come up with the 200 BILLION dollars needed to build the transmission corridors from the center of the country to the east and west coasts where the power is actually needed? I give this part of the plan a B-.

Natural Gas

Now, here where things get a little murky. Instead of just using that wind power to augment our electrical power generation, Boone wants to use it to replace gas fired plants. He wants to shift the gas from producing 22% of our electricity to powering our cars and trucks.

NGV’s are not a bad idea. As Mr. Pickens points out, they’re a third less polluting than gasoline vehicles and, right now, the fuel is cheaper. However, on FOX News he admitted that, if fully implemented, this part of his plan might drive the cost per gallon of natural gas from $1.50 to $3.00. That’s still a deal when we’re looking at $4.12 at the pump for gasoline. But I have to wonder if the folks that heat their homes with natural gas would mind doubling their heating bills? I also have to wonder if replacing one fossil fuel (oil) with another (natural gas) is a good long term solution to the problem.

Oh and by the way, just for the purpose of disclosure, Boone Pickens has a major investment in natural gas vehicles. His Clean Energy Fuel Corporation is America’s largest supplier of natural gas for vehicles. He’ll be making a couple of bucks here too. I give this part of the plan a D-

That pretty much does it for Boone Pickens’ plan. Oh, when he does his white board presentation he touches on the other alternative sources of energy. He’s basically for all of them. The thing is, he’s only pushing the ones that can make him money. That’s OK, like I said, profit is good. But, if we’re going to save ourselves and the planet in the long run, we need to explore all of the options. Stay tuned for that post. Until then Mr. Pickens, it’s not that I think that you’re barking up the wrong tree; I’m just not sure that the coon’s as big as you think it is. I’m sure it’s not as gullible.

TD

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3 Comments on “Kiss our Grits OPEC”

  1. scotty Says:

    There is a Public Discussion Forum For Pickens Energy Plan : http://www.pickensenergyplan.com. It would be great if you participate there.

  2. Tom Says:

    I say part of the money for the plan can be diverted from the “STUPID” fence along our borders. Also, when are our presidential candidates going to discuss the energy crisis??

  3. winteridge Says:

    It would be nice if we could divert the $700 billion GW is investing in the stock market to developing windmills and alternate energy sources. Is it coincidence that $700 billion is the estimated cost of our oil imports?


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