Forming a New Challenge

I won’t pretend to be an expert on the oil industry. However, I think I can discern several points we should be interested in as a nation. The pluses and minuses for America regarding the oil industry are these:

Pros:

• Diverse players and integrators of oil products and byproducts
• Vertically integrated: we discover resources, drill for them, refine and distribute
• Horizontally integrated: we create industrial spinoffs from energy suppliers to chemical producers, lubricant equipment systems, energy systems and ever widening engineering applications
• Allied with associated energy production such as natural gas
• Research and development in alternative energy sources: shale oil, tar sands, solar, wind and thermal

Cons:

• Drilling pollution of landscape and aesthetics
• Shale oil mining pollution and aesthetics
• Pollution of soil, water, air and global temperatures
• Underwater drilling perils: Gulf coast and delicate coastal areas
• Volatile pricing markets: shrinking reserves, limited future resources, environmental restrictions, quality of life boundaries, geopolitical issues
• Foreign disruptions from monopolies and oligopolies (OPEC, etc.)
• Foreign policy sensitivities: Middle East, Russia-China bloc nations
• Terrorism threats

Over several generations we fully integrated oil into our lives. We discovered chemicals and materials which have vastly improved our standard of living and quality of life: plastics, exotic lubricants, paints and coatings impervious to wear and tear, new fabrics and cosmetics and medicines. Also, agricultural applications increased the spread of petroleum applications. The array of products derived from oil is phenomenal.

The economic benefits have been tremendous. So are prices and market volatility. The slightest threat to any of the above creates huge oil price swings often destabilizing to  governments and the global economy.

Once we were anchored to the Gold Standard. It faltered during World War I but was finally abandoned in 1933. From that time national currencies are allowed to float based on their own intrinsic and trade-based values.

Like gold, oil is a commodity. It is highly valued throughout the world and has become a de facto standard of international trade. Think of it as the Oil Standard.

For those investors who own any part of the oil industry, or trade in oil products, they are wealthy and likely to become more so. They win. All others lose unless you are employed or supply those industries.

If there are big winners, however, there are bound to be big losers. Think consumers and everyone else who has no choice but to pay larger prices for the goods and services tied directly to the oil standard.

There is an alternative we could pursue: create alternative energy resources.

This means finding ways to lubricate our machinery or eliminate the need to lubricate. It also means, finding ways to power our cars and trucks, trains and planes and all other transportation forms. Heating and air-conditioning energy alternatives are needed, too. Generation of energy from non-petroleum sources would be helpful. In short, replace the use of oil in as many ways as is possible. The results would be these:

• Conserve oil reserves for uses which cannot replace oil as the key element
• Increase supplies of energy at lower cost thus stabilizing price and cost of living
• Lessen geopolitical tensions over the power and control of oil resources
• Birth new industries which will provide jobs, new technologies, innovation, production efficiencies and international trade
• Stability of international power and foreign relations

If these are noble goals to reach for, why haven’t they surfaced before?

The short answer is: they have. Discussions on these topics have been present among scientists, economists, government policy makers and academicians for years. But the research and development machinery is stymied by some natural guardians of the status quo: oil companies and automotive industry. They think they have much to lose if the oil standard is abandoned. To push us off they pretend to do research and development in alternative energies. They issue press releases to that effect but have you noticed any major new supply of alternative energies? Not really.

President John F. Kennedy challenged us to put a man on the moon. We accepted that challenge and invented our way to the moon. We had a lot of the elements already in hand but we lacked a strategy and key engineering knowledge to make it happen. We created those to meet the challenge, and ahead of schedule!

I’m suggesting we should do the same with energy. Create energy alternatives to replace 75% of the current use of oil, or more, by the year 2020. We can do this and re-energize America at the same time in more ways than one!

You know we can do this. Who will lead us in answering the challenge?

October 22, 2011