Straight Talk from T. Boone Pickens
By Bill Moore
"I think America is getting acquainted with the problem," T. Boone Pickens replied to Will Kleindienst, the former mayor of Palm Springs as they sat in two comfortable overstuffed chairs on the stage of the 2007 AFVI conference and expo in Anaheim, California. This conversation between two long-time friends chatting amicably about Pickens' views of the state of the world repeated a theme begun by Neel Kashkari, the morning's first keynote speaker from the U.S. Treasury Department; that the America is facing a serious crisis.
The problem Pickens referred to is the energy one, which hangs like the proverbial "sword of Damocles" over America, the nation that consumes 25 percent of the world's oil and produces a quarter of the planet's greenhouse gases, yet constitutes just five percent of the population.
"The problem is we are importing sixty percent of the oil into the United States," he commented. In his slow, folksy, Oklahoma drawl he related how he had once gone hunting with two U.S. Senators and Vice President Dick Cheney . Afterwards, Pickens had bought dinner and talked about energy and how precarious the U.S. position is. He had pointed out that 75 percent of the world's oil is used in transportation, which apparently came as a complete surprise to one of the Senators, who repeated it so he was sure he hadn't misunderstood.
"You got it right," Pickens confirmed.
"There's no question that's worth remembering," the amazed Senator remarked.
Pickens was dumbfounded, having assumed anyone from this august body would know this. He didn't say how Mr. Cheney responded, though he did remark the Vice President a crack wing shot and a safe hunter, though Pickens did say he preferred to observe the hunt from the safety of the truck cab, which he was driving.
That same Senator was probably also oblivious to the fact that the world, Pickens continued, produces 85 million barrels of oil a day and that multiplied by 365 days calculates out to be more than 30 billion barrels of oil a year.
"You take 30 billion barrels out of the world's reserve base and we have not replaced 30 billion barrels since 1985. You're talking about twenty years. You keep drawing down on the world reserve base... and it is happening because you can't find big oil fields anymore. They're just not out there to find."
"Some believe that you just pour more money into the ground," Pickens continued, " and the oil will be there at some price, which is untrue.... We have peaked at 85 million barrels."
Kleindienst, who is an EV World reader, asked him what he thought of all the talk about American energy independence. Pickens answered that he is advising the current Republican front runner for President, Rudi Guiliani that he shouldn't talk about energy independence, because it will only lead to the next question, how do you plan to achieve it? Pickens thinks it's a hollow promise, that America can't achieve energy independence because we are so heavily dependent on oil imports. Clearly referring to the peak oil phenomenon, he warned Guiliani that the energy problem is "going to get more intense" for the next U.S. President. "It's easy today... energy [concerns are] going to get much bigger."
"We buy a lot of oil from our friends. We also buy a lot of oil from our enemies; that's what I'd like to cut off, and just buy from our friends. If we didn't buy oil from Canada, we'd wreck their economy.... We've got in a spot where we're... intertwined with both Mexico and Canada and others that we buy from: Norway, Nigeria... other places around the world that are not our enemies. We're going to always have to buy oil..."
He elaborated on the current realities of the market. The two largest oil producers in the world are Russia and Saudi Arabia, which -- he pointed out -- have been holding private talks, presumably to discuss how high a price they can charge for oil without sending the world into a recession.
"But the Russians are also trying to form some kind of a relationship with Iran and the Russians and Iranians are the two largest [natural] gas producers in the world. Where do we (the United States) fit in this whole thing? We're the largest importer for oil, is where we are and the second largest importer is China. So, here you look at the line up of where you stand in this whole thing and we're at the bottom of it."
Looking around the conference hall, Pickens observed that he believes that every one of the various alternative fuel technologies are going to get a chance to play a role as America looks for ways to meet its energy and transportation needs. He noted that he started "selling this idea" of the importance of alternative energy twenty years ago.
"In 1988, I went out with a pitch that natural gas was cheap, it was cleaner and it was domestic. Nobody heard but one thing out of that: cheap. They didn't care that it was cleaner. They didn't care that it was domestic. They were only focused, if they were focused at all, on it's a cheaper fuel and cleaner than diesel."
In 2007, the landscape has changed completely. Pickens said that politicians and policy makers on the American east coast just last week are now saying that their region is gong to have to start emulating California in terms of its energy policies and use of alternative fuels.
No one has ever asked why we [Americans] use five times as much oil as the rest of the world, he pointed out. "That question is going to be asked more and more. There's no question, but we are going to have to reduce our energy [consumption]."
Queried by Kleindienst what he would do if he were the next energy secretary -- and Pickens joked that he'd insist on being called 'czar' -- he replied that the country is going to need every renewable energy source it can muster, including wind power, which while he's not a fan of the big turbines for esthetic reasons, he is now re-invested in it after an earlier abortive venture in the business.
"Wind is going to be a big deal," he commented. "You're going to have solar, you're going to have wind. You're going to have biodiesel. You name it, you've got it," he drawled. He also said that as energy 'czar' he'd raise the price of gasoline, working to establish a common, worldwide price for gasoline, just as there is a largely global price of oil. He said people who want their SUVs will be able to have them, but it's going to cost a lot to run them.
He would take the revenues from the increased price of a gallon of gasoline, which would be comparable to the price Europeans have been paying for decades, and invest it in alternative energy, while also offsetting taxes elsewhere to help ease the burden, but he added that the only way we can kill demand for gasoline is to raise the price, painfully.
Kleindienst asked him what his views were on global warming and he replied that because he's a geologist by training he wouldn't normally be of a mind to believe it, but for him the evidence if overwhelming.
"It is a credible threat?" Kleindienst asked?
"Yes sir," Pickens replied.
He explained that it took a century for mankind to use its first trillion barrels of oil. It will take just sixty years to use the next trillion", which he agreed will be harder to extract and be more expensive. "So what's going to happen is you're going to have to go to alternatives." While dismissing oil shale as a non-viable option, he did see the tar sands of Alberta as being viable-- producing a million barrels a day of crude today -- and recommended Suncor, a big developer of this resource, as a good investment he's owned for the last decade. But he also sounded a cautionary note.
"The world can't continue to run on hydrocarbons."
"The infrastructure for the production of oil in the United States is old, old, old. We're producing five million barrels a day and we peaked in 1973 at 10 million barrels, so we're producing half of what we did."
He observed that the average oil well in America produces 5 barrels of oil a day compared to Saudi wells that produce 5,000.
"We're a marginal producer. We're a stripper. That's what you call stripper production. But the infrastructure is old. It's old. The refineries. Everything is old here," he repeated, adding however, that newer components have been added over the years, but the underlying system is outdated.
"Don't get the idea that Alaska is the solution to the shortage of oil in the United States. Remember, we're using 21 million barrels a day... and the pipeline on the North Slope will carry two million barrels a day. That's it. And don't get any ideas that we're going to have a second pipeline any time soon. You take the Arctic [National] Wildlife Refuge... open up ANWR to solve the problem of the lower 48... that's baloney. We're producing about 700,000 barrels of oil a day down that pipeline. It's declined from two million to 700,000 barrels. If we could fill it up, we could produce two million barrels. So, Alaska is not the solution..."
In discussing how the conference attendees can help influence Congress, Pickens responded, "I can tell you that the problems are going to come so fast and the price of gasoline is going to go up so fast here within the next twelve months, they are going to start catching on real quick that you're going to have to do everything you can to cover the base, and you're also going to realize that the supply [of oil] is so tight...
"Matt Simmons, a very, very bright guy that knows a lot more about this business than I do, and Matt Simmons last week sent me an.. email that said the [petroleum supply] system is so tight now. Hhe said that storage is down... inventories around the world are coming down so fast now... everything is getting so tight... that you're going to see oil priced above $80 a barrel [this year]. And he said that if you had some kind of hiccup in the system it could go to $100 faster than a hot knife through butter.
"And I believe that and I think that when that happens, this thing is going to get so serious so fast that you're going to get the help out of Washington. You're going to have these politicians running for president, they're going to start talking about, 'We're going to have to do this, this and this, and all of it is going to help us, us, us in this room. I really believe that's going to happen."
blog comments powered by Disqus