U.S. Energy Update

May/20/2009 14:22PM
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It’s like a black cloud hovering over America. The next energy price explosion. We are doing nothing about it. Whenever it is mentioned we get two answers: green initiatives and technology. When drilling comes up one answer: it would take five years to help.

These are the same responses that we have given for the past 25 years.

Two countries, the U.S. and China. China operates like a corporation, with the CEO as a benevolent dictator. Corporations have always worked better in American and around the world when it comes to running businesses. Government, especially here, has never been able to run anything. We have years of history with the Post Office, Medicare, and Amtrak. Why doesn’t it work? Because government runs a business like they run politics. Lot’s of bureaucrats who are looking for safe ground and big benefits with union protection. Medicare has more waste and fraud than any organization in the history of this country. So, government here can’t run the energy strategy as the DOE has proven for 25 years. Billions of dollars to make us energy independent and no results.

China, on the other hand, runs the energy business like a corporation. They are busy building as many as 50 new nuclear power plants. They are locking in oil supplies around the world. They are even building a pipeline from Russia to tap that source. Recently, they entered into a deal with Brazil to lock up the huge new crude reserves much closer to us than China.

The Chinese will only make token efforts to curb carbon. They will offset everything every other country does a hundred, if not a thousand, fold.

Two countries on opposite paths. One is right and one is wrong. Who are you picking? This will decide to a large extent whether China displaces America as the next big Superpower.

We depend heavily on Canada and Mexico for oil. Investment in new oil has virtually stopped in both countries. Mexico has a government run oil company. Crude reserves have been dropping for years. The Mexican government has tried unsuccessfully to get the major oil companies to come in help find new reserves. The government-run oil company does not have the science and technology to find the new reserves, but the government oil company keeps gasoline prices artificially low. The public does not want to have the private sector in the picture for fear gasoline prices will go up. One fine day in the not too distant future, Mexico will have no surplus to export to the U.S. Canadian tar sand exploration has stopped. They need $60 a barrel to make it work. So work has stopped.

We will see $100 a barrel crude sooner rather than later. We will not see the demand drop, despite the new CAFE standards, cap and tax, and all the other great plans our government has to drop it quickly. When the $100 price hits again, it may not go away.

We are betting the farm on ideas put forth by a government that is unable and unwilling to do what it needs to do to protect us. When it fails, the blame game will be back. But, blame and all that comes with it will not fix our problem.

The Chinese will stop using the dollar to buy oil as will the rest of the world. That is closer than you think. The Chinese are getting rid of their dollars as fast as they are snapping up new sources of conventional energy.

This will make the current recession look like child’s play. The government will get their wish, the environmentalists will have their dream, and we will inherit the nightmare.

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