Skip to comments.Steffy: Pickensí new plan to break OPECís grip on U.S. energy markets
Posted on 02/27/2013 5:35:31 AM PST by thackney
T. Boone Pickens was headed to a private lunch with outgoing Energy Secretary Steven Chu when I caught up with him by phone this week.
In the four years that Chus been in office, hes never met privately with Pickens, the outspoken former oilman turned investor whos been a proponent of natural gas vehicles.
For the past few years, Pickens, who lives in Dallas, has been promoting his plan to wean the country off foreign oil. Critics are quick to point out that Pickens agenda would promote his investments in natural gas and a company that makes natural gas vehicles. Others call that putting his money where his mouth is.
But his latest proposal, which he outlined in a speech to the Energy Department on Tuesday, bears consideration. He wants to leverage recent increases in domestic oil and natural gas production to break OPECs grip over the U.S. economy.
To understand why this is important, look no farther than the nearest gasoline pump.
The persistent increases at the pump undermine the recent talk of oil abundance or U.S. energy independence. Its a reminder that we remain beholden to a global oil market that is anything but free.
OPEC is a cartel, Pickens said. They control prices with production. Since October, the Saudis have sharply curbed production, and consumers are seeing the impact at the pumps today.
For decades, weve relied on Saudi Arabia to keep its production high enough that crude prices remain affordable. Yet in the past year, as our own production surged to an 18-year high, the Saudis cut theirs to a 19-month low.
The reduced production from Saudi Arabia and other OPEC members has kept global oil prices high, and those costs are passed on by refiners to the pump.
Gasoline prices are a complex calculation, and as always, other factors also come into play. Most U.S. refineries, thanks to decades of processing overseas crude, lack the ability or the infrastructure to process oil from the interior of the U.S., forcing them to rely on higher-priced imports.
The dynamics of the global oil market arent likely to change, and with about 80 percent of the worlds oil controlled by state-owned oil companies, we need to rethink our approach.
The U.S. cant beat OPEC at its own game, and we shouldnt try. Instead, Pickens is calling for fuel competition, especially for motor fuels.
It isnt going to be with oil, he said. Natural gas is the answer.
Thanks to hydraulic fracturing, natural gas is abundant and cheap, making it the logical choice to bridge the gap between current transportation needs and the more viable renewable fuels well need in the future.
Im still skeptical that natural gas vehicles will catch on with the public faster than electric cars, but fleet vehicles are already being converted. For trucks that return to the same place every night, such as delivery vans and city buses, natural gas makes a lot of sense.
Its that fuel diversity that will best insulate the U.S. from global price shocks.
Pickens has a new set of proposals that he was planning to bounce off Chu, although he didnt know how they would be received.
They included a review of federal tax policies to eliminate measures that favor diesel over natural gas. His most radical proposal is also the most interesting: eliminating the Strategic Petroleum Reserve. The reserve was created 40 years ago in response to the Arab oil embargo, and like many of our energy policies, its rooted in decades of dependence and a presumption of scarcity.
The 700 million barrels in the reserve were amassed at an average price of $28 a barrel, which means the government stands to make a nice return on its investment, assuming it disposes of the reserve carefully.
You can mess up the oil market with it if you sell it all at once, Pickens warned. He proposes we dribble it out over 10 years then use the proceeds to fund renewable energy initiatives.
Pickens is quick to note that while he supports renewables he once planned a massive wind farm in the Texas Panhandle most arent viable based on current technology, and they dont address our biggest use of oil: transportation.
Renewables do not move an 18-wheeler, he said.
I first interviewed Pickens in 1990, when he was beginning an effort to promote natural gas vehicles. Regardless of how you feel about his plan, you cant fault his persistence.
Pickens plan isnt perfect, but hes been effective at getting the country talking about energy issues, and his latest ideas deserve consideration. They outline a pragmatic progression to fuels of the future.
Even if Chu didnt listen to him, someone at the Energy Department should.
Isn’t Fracking doing this on its own?
‘eff Pickens. He’d support Hitler if it made him a few more bucks.
Pickens is also a windmills guy, or at least was.
I have no respect for him.
Why do billionaires like T. Bone-head always insist on lobby the government to take more money out of my pocket to give to themselves? If they like the idea so much, they should pour their own capital into it and see if others agree by voting with their own capital voluntarily.
No, that's putting OUR money where his mouth is.
The US gets 40% of its oil from the US. 20% from Venezuela. 15% from Canada. 13% from the Persian Gulf. 10% from Nigeria. As of 2012. However, crude oil is fungible, which means we buy it from the oil market, *not* directly from its producers. And the market buys oil from whoever sells the highest quality oil (light, lots of volatile molecules; and sweet, low sulfur) at the cheapest price.
However, this is strongly changing, due to fracking.
But, ironically enough, even if the US produces a lot more oil, it will do so cheaply enough that the oil will be *exported* into the oil market, as it will command better prices there than domestically.
All this means is that we will run a lower trade deficit, or even a surplus. Surplus. Gee, when was the last time you heard that word about the US economy?
Pickens is an intelligent man. But when he starts talking, I always feel a need to grip tightly to my wallet.
I don't understand why people how understand the concept of a fungible commodity think we will eventually be paying less than market price while taking into account transportation costs.
It's surprising that this forum, which promotes free enterprise, has so many Pickens haters on it. If there ever was a man who "put his money where his mouth is", it's T. Boone Pickens.
Pickens has repeatedly called for government intervention into the market. He has promoted mandates and subsidies. He does this AFTER positioning himself to benefit from those mandates and subsidies. While much of what he promotes would benefit some Americans, it benefits T. Boone first.
The problem right now with NG fueling transportation is access to fueling stations. Even here in Texas there are very few NG fueling stations. If and when NG fuel stations become more abundant, I will switch over ASAP.
Even Pickens does not have enough money to build very many NG fuel stations, that is why he is lobbying the gubmit for tax breaks or whatever.
Moving from oil based to NG based transportation fuel is most definitely in USA’s best interest, no different that Brazil promoting sugarcane ethanol to get them away from OPEC.
The fact of the matter is companies, including Picken's Clean Energy Fuels, are already going forward under the current taxing rules.
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There are also consumers of the fuel investing in their infrastructure already as well.
To say they won't go forward with this technology without additional tax payer funds is not correct. Many already have and the list continues to grow.
Wouldn't you do the same thing if you were in Boone's boots? By the way, he's not asking for mandates, he wants subsidies to move fueling of 18 wheelers along faster.
Without a doubt, the Natural Gas vehicle fueling is a good thing. There are also companies investing in using methane for Ships, Trains and the like.
But I strongly believe, having the government select technologies, use tax payer funds to benefit some companies while excluding others, is a terrible idea.
Tell me why we should give CNG tax incentives that would not apply to a technology like Shell is using doing to turn Natural Gas into a liquid fuel like diesel?
This technology is already proven and working. It requires no additional investment by a consumer.
The best thing government can do to encourage new development of technology that helps our economy and energy independence is to limit their involvement in the process.
No. I have never found government involvement in my business to be in my best interest in the long run. T. Boone is more of a political and public personality than I ever want to be. I don't mind wealth. But government derived wealth comes with too many strings and can change to quickly with public opinion and a vote.
Why would the regime support a plan that undercuts Barry’s allies and their control of oil prices?
If you have a link, to what is actual request is, I would appreciate the information. I have searched: http://www.pickensplan.com/ It is long on description of why we need the plan and very short on description of what that plan actually is. In the past, Pickens has included mandates such as new governmental vehicles be Natural Gas fueled. His wind program included mandates as well for percentage of supplied power, assigning right-of-ways for new transmission lines, etc.
Correct, but on this he is right. His windmill farms are a scam on the taxpayers but his ideas about oil and gas are sound.
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