Busch: Long Term Energy Plans Can Be Short Term Solutions
As T. Boone Pickens in the Wall Street Journal described his master plan for solving an aspect of the US energy crisis: dependence on foreign oil. At its core, this solution was really only a swap of foreign energy sources from oil to natural gas.
In his article , Boone has this to say about the plan: "My plan calls for taking the energy generated by wind and using it to replace a significant percentage of the natural gas that is now being used to fuel our power plants. Today, natural gas accounts for about 22% of our electricity generation in the U.S. We can use new wind capacity to free up the natural gas for use as a transportation fuel."
"That would displace more than one-third of our foreign oil imports. Natural gas is the only domestic energy of size that can be used to replace oil used for transportation, and it is abundant in the U.S. It is cheap and it is clean. With eight million natural-gas-powered vehicles on the road world-wide, the technology already exists to rapidly build out fleets of trucks, buses and even cars using natural gas as a fuel. Of these eight million vehicles, the U.S. has a paltry 150,000 right now. We can and should do so much more to build our fleet of natural-gas-powered vehicles."
At the time, CNBC's Phil LeBeau aptly pointed out that there are only 1,000 cars on the road (mainly in CA) that use natural gas and it's unlikely the auto industry would commit to building more. There just isn't the infrastructure to service the cars nor to fuel them on the road nor do they have range of current cars. Three strikes you're out.
More importantly, there is the law of unintended consequences for natural gas. With a shift in demand to natural gas away from oil, the price of natural gas isn't going to sit still. It's currently $12.30 and it's going to move up. How high, I'm not sure but it would certainly increase the cost of such a plan. Most importantly, it could significantly increase the cost of something else: food. Natural gas is a major component of making fertilizer. Even in the short run, potential higher food costs alone would derail such a plan.
However, Boone's plan is a major positive step forward in the discussion about energy in the US. His ideas about wind deserve serious consideration albeit with a subsidy. As a matter of fact, the wind industry is currently asking for a renewal of the tax subsidy now. (Was this Boone's way of pushing the process?) Also, Texas just embarked upon a multi-billion dollar program for new wind capacity to generate electricity for 3.7 million homes. The state is now known as a "wind-rich" state which refers to energy not politicians.
The more intriguing question is when will Congress/President create a unified energy policy? This is why people with vision are so critical for the country: they recognize a major problem and they offer a SOLUTION! Boone's plan is an intriguing piece of the energy puzzle.
Remember, this isn't just about what we can do now for the price of gasoline or energy. If this was the only criteria, we would only engage in short term policy changes that have short term impacts like opening up the strategic petroleum reserve.
We need longer term plans to solve the longer term energy problems of United States. In case you aren't familiar with how markets react, a coherent, logical plan of action towards providing long term solutions will have a positive impact now on the price of energy. Why? Because it will shift the short term psychology of the market away from doom and gloom towards a light at the end of the tunnel scenario.
We only need to look at President Bush's lifting of the moratorium on off-shore drilling to see an example of this in the markets. Did this act significantly change the short term outlook for oil? No, but it changed the discussion on the subject at a time when it was needed. In turn, this aided the shift in market psychology back to some fundamentals like demand.....which is dropping.
This is why it is critical that no long term idea get discouraged or disparaged by anyone (Congress, Presidential hopefuls, or press) when it comes to solving the nations energy problems. A long term idea can be the short term solution.