Letter from T. Boone Pickens to WSJ

Here’s a letter published in the Wall Street Journal from T. Boone Pickens. He is responding to a letter criticizing his plan from Mr. Jenkins.

Link: Letters – WSJ.com.

This Is My Plan for American Energy, What’s Yours?

I read Holman Jenkins’s "Boone Doggle" (Business World, Aug. 6) about my energy plan and I’m convinced that he hasn’t even read my plan. So for the benefit of Mr. Jenkins and his readers, I’ll go over it again.

There are two numbers everybody should keep in mind. The first is 70% — that’s how much of our oil comes from foreign nations.

The second is $700 billion — that’s how much of our money is sent overseas to pay for that oil every year.

Mr. Jenkins argues that this isn’t technically a "transfer of wealth." You can call it whatever you want, but common sense would call it a crisis. It’s hitting every part of the economy, and it’s only going to get worse because we consume 25% of the world’s oil, but we only have 3% of the oil reserves. For years we paid foreign nations to send us their oil and didn’t worry about it because it was cheap. But now it’s not and it matters a great deal.

We’ve had warnings before. Some of us remember the oil embargo of 1973. Back then we were importing less than 30% of our oil but it was still a crisis. And what did we learn? Today we’re importing nearly 70%. We all have — and I emphasize all — allowed our nation’s energy future to rest in the hands of foreign interests. And if we need to know how dangerous it is to rely on other countries for our energy, just look at what’s happening in Georgia. Yes, we buy some oil from our friends, but we also buy from some who aren’t so friendly.

We have to develop domestic energy alternatives and set ourselves on the road to self-sufficiency. Ultimately, that will mean using domestic renewable energy to generate electricity and power our vehicles. Unfortunately, clean, renewable fuels for transportation aren’t ready yet. So here’s my plan to break the foreign stranglehold.

It starts with wind. A Department of Energy study says we can generate 20% of our electricity from wind. I believe that with private investment and proven technology, we can generate 20% of our electricity from wind within 10 years — which happens to be the same amount we currently generate using America’s natural gas. Moving to wind power will allow us to conserve domestic natural gas for transportation. It’s cheaper, it’s cleaner, the technology is ready now and it’s abundant — America only has 20 billion barrels of oil and we’re trying to drill for a few billion more, but we already have the natural gas equivalent of 110 billion barrels in proven reserves and 170 billion more that are being accessed through new technology.

But most importantly, natural gas buys us one thing money can’t buy — time — the time to develop the renewable fuels that will finally end foreign oil’s stranglehold on the U.S.

That’s my plan — to harness domestic resources to reduce the impact of foreign oil and buy us time to perfect the next generation of clean renewables, allowing us to invest more of that $700 billion a year in our own destiny. I don’t expect everyone to agree with it, but I think it’s a good one.

My father used to tell me that a fool with a plan is better than a genius with no plan. So I ask, what’s Mr. Jenkins’s plan?

T. Boone Pickens
Dallas

Talk about Energy Independence — But No Leadership

Gideon Rachman at the Financial Times provides some insight into how the U.S. became addicted to oil and how leaders avoid the tough love required to face the problem.

Link: Business Spectator – Oil’s slippery slope.

Mr McCain’s promise to eliminate American dependence on Middle Eastern oil is hardly original. Barack Obama and Hillary Clinton have made similar pledges. President Bush himself swore to end America’s “addiction to oil” a couple of years ago. President Richard Nixon made similar promises after the first oil shock of the 1970s. The reality is that things are moving in the opposite direction. In 1973 the US imported 33 per cent of its oil; today it imports about 60 per cent and this figure could rise to 70 per cent by 2020. America’s transport system is still completely dependent on oil.

American politicians have, so far, responded to this problem with a mixture of wishful thinking and anger. The calls for “energy independence” are all but universal. Money has been poured into the production of biofuels, which has helped push up food prices. But no leading politician is yet prepared to say that Americans may have to adjust their lifestyles to a world of permanently higher fuel prices.

Last week Senator Pete Domenici, a Republican, issued a plaintive appeal for “more oil and lower prices”. The Democrats are pressing for the US attorney-general to bring price collusion charges against members of the Organisation of the Petroleum Exporting Countries. But any such action significantly overrates America’s power over the world’s oil producers. Opec members could retaliate by selling some of their huge reserves of dollars – which would hit the dollar and US consumers very hard. The world’s main oil producers have no shortage of potential customers. More than 50 per cent of Saudi oil is now exported to Asia.

Competition for the world’s oil supplies is intensifying. Chinese oil consumption doubled between 1994 and 2003 and will have doubled again by 2010. China’s foray into Africa is largely driven by its own search for “energy security”. The International Energy Agency predicts that in 2010 China will become the world’s largest consumer of energy. The IEA also thinks that the world’s energy needs will be 50 per cent higher in 2030 than they are today – and that we are going to become more, not less, reliant on fossil fuels.

This seems all too plausible. At present there are about 10 cars in China for every 1,000 people; there are 480 cars per 1,000 people in the US. But by 2015, China could be the world’s largest market for new cars.

While western politicians routinely worry about globalisation, they have yet to focus on a more plausible threat. It is not the outsourcing of well-paid jobs; or the inflow of cheap goods: it is the globalisation of western patterns of consumption. If the Chinese and Indians eventually eat and drive like Americans and Europeans, the current inflation in fuel and food prices could be just the beginning. The environmental implications are also obvious – and alarming.

So although the search for energy security is now central to American foreign policy, as it is for both the European Union and the main Asian powers, in the long run there is no real foreign policy fix for the problem. A future dominated by conflict over scarce oil resources – or truckling to oil-rich dictators – is not attractive.

The only plausible routes to “energy security” lie at home in the US – in the development of new technologies and in a change of lifestyles. Americans may have to drive their cars less. But it will be a brave presidential candidate who says that.