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Last week I interviewed the Texas energy baron T. Boone Pickens four consecutive nights in front of a live audience. Pickens would talk for 40 minutes and then I would interview him for 50 minutes. (Full disclosure: I was paid a fee to do this, not from Pickens but from the event's owner.)
The Pickens presentations had an interesting underlying tension: Texas billionaire, oilman and Republican trying to convince earnest San Francisco Bay Area liberals about the virtues of natural gas. How did Pickens do in front of liberal, vaguely hostile audiences? Surprisingly well. He made his case with numbers.
Here is what Pickens said:
– Global demand for oil is 86-88 million barrels per day. It will be 90 million by the end of the year, due to global growth.
– Global production is 84 million barrels per day. Since production falls short of demand, prices have risen.
– America consumes 20 million barrels of oil per day. We produce 7 million barrels domestically and import the other 13 million barrels. Of the 13 million barrels of imported oil, 5 million come from OPEC "“ "nations that hate us," says Pickens.
– The true cost of Middle Eastern oil is over $300 a barrel if you account for U.S. military presence in the Middle East, according to Pickens.
– "Drill baby, drill" "“ the conservative mantra to drill more oil from the Gulf of Mexico, off the East and West Coast shelves, and the Alaska Natural Wildlife Refuge (ANWR) would produce an extra 2 million barrels a day at best, says Pickens. The would raise America's domestic production from 7 million to 9 million barrels but still leave America 11 million barrels short each day.
– In ANWR, the bottleneck is the pipeline from Alaska's north shore. "It would take 30 years to build another pipeline," says Pickens.
Hence the allure of natural gas: Pickens claims the U.S. has natural gas reserves equivalent to three times that of Saudi Arabia's known 260 billion-barrel oil reserve when you use a Barrel of Oil Equivalent (BOE) comparison.
– Using BOE, natural gas, at its current price, would be about $1.50 per gallon cheaper than diesel fuel.
– Using BOE, natural gas emits 30% less carbon
Boone Pickens wants to convert America's 140,000-unit fleet of 18-wheel truckers to run on natural gas. Pickens says the cost of converting the next-generation fleet of 18-wheelers would be about $60,000 per vehicle "“ or roughly $9 billion for the entire 140,000 fleet. Where will that money come from?
Last week, Congressmen John Sullivan (R-OK), Dan Boren (D-OK), John Larson (D-CT) and Kevin Brady (R-TX) introduced H.R. 1380, the "?New Alternative Transportation to Give Americans Solutions' (NAT GAS) Act to supply the funds. It would ladle out a billion or two a year.
Is this a smart use of government funds at a time when the government is essentially broke? Yes, I think so. If you believe the Pickens numbers, our imported OPEC oil is costing America $2 billion a day and would cost $6 billion a day if unsubsidized by the U.S. military presence in the Middle East. Also, some percentage of the money we send to Saudi Arabia makes its way to our enemies, such as the Taliban.
But if natural gas is so economically compelling, why won't private investors come up with the funds? It's a critical mass problem, argues Pickens. America needs to prime the pump, as it were, to get the wheels turning. Start with 18-wheelers, he says, and that will create a national infrastructure of conversion technology and delivery. To my libertarian friends: Don't forget that the U.S. government bought the first billion dollars worth of semiconductors in the 1960s. That created the funds for factories and volume manufacturing which in turn drove prices down to affordable levels for civilian uses. Industrial policy? Yes.
America's commercial use of its vast, cheap, natural gas reserves will take a bipartisan political effort. Democrats will have to say no to the radical environmentalists and their hostility toward fossil fuels. Republicans will have to say no to the Tea Party and their hostility toward government funding.
Bipartisan consensus is a rarity these days. It is certainly out of fashion. But energy independence will demand it.
's Categories: Business, Economics, Energy, Op/Ed, Policy, byline=Rich Karlgaard
Boone is nothing if not persistent (and often persuasive). These are the same California voters who turned down Prop. 10 in 2008, which Boone heavily backed and which was supposed to authorize the state to borrow up to $5 billion to pay for nat-gas vehicle rebates, refueling station gear and R&D. Didn’t pass. Boone is back now focusing on an easier black-to-blue carbon conversion target–trucks and other heavy vehicles. A shrewd evolution in the Pickens plan.
Did Boone tell you he was Texan? He’s most definitely a Sooner.
Hostility to fossil fuels is not due to an ideaology; it is due to concern for healthy conditions for ourselves and future generations. Environmentalists have nothing to gain from their proposals. Conversion to natural gas solves one problem but continues to prolong others ie: all fossil fuels add carbon from millions of other atmospheres into the present atmosphere and that proportion is already gravely skewed against our health; fracking is used in natural gas extraction which is abominably bad on the environment; funding is wasted in converting vehicles to NLG because we would be delaying the inevitable and will pay later to change again. Be daring, take the plunge now and go for clean energy and lead the world on that platform. Create a market for American made electric vehicles. Purchasers receive a substantial credit, funded from the fossil fuel subsidies. The fossil fuel industry would then have time to “retool” their obsolete businesses. This initiative too would “prime the pump” as Pickens says, kick starting demand for American industry, resurrecting our manufacturing base, rebuild our towns and put people in the U.S. back to work while simultaneously activating a flurry of investment and research into associated technologies such as battery technology. We’ve got to be courageous and just make the decision that benefits everyone’s interest. The fossil fuel industry superseded the horse and buggy but now they too are outmoded and must stand aside and stop obstructing the U.S. from moving on.
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I am the publisher of Forbes, have written a column for the magazine since 1998, and have blogged for Forbes.com since 2005. In 2004 I wrote a book, Life 2.0, which was a Wall Street Journal business best-seller. I travel 200,000 miles a year on the speech circuit and am regular guest on Fox News Channel's Forbes on Fox and a semi-regular one on CNBC's Kudlow & Co. Steve Forbes recruited me in 1992 to start Forbes ASAP, a technology magazine. Before that, I had co-founded two companies (Garage Technology Ventures, in 1997; and Upside Magazine in 1988) and one civic organization (the 6,500-member Churchill Club in 1985). I am currently an outside director for two tech companies: Intelius, a search provider; and Flow Mobile, a broadband wireless company.
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