by Gil Friend
January 2006
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Houston: We've Got a Problem
Source:
Gil Friend
You'd expect a
cover
story about "peak oil" from WorldWatch magazine -- but Barrons?!
Titled "Twilight for Oil?" in the Jan. 2 print edition, and
An Unapologetic Alarmist online (subscription required), Sandra Ward
interviews Matthew Simmons, head of energy investment banking firm
Simmons & Co. The headline on Barrons' cover -- "Preparing for (gulp!)
$200 oil" -- about sums it up.
But oil supply isn't going to grow. As we move into the brutal brunt
of the winter, we could easily have 45-to-60 days where demand is
basically two-to-four million barrels a day higher than supply. Then
we will test how robust our inventories are, because we've never
experienced that kind of stock draw before. In the United States, in
some areas we must be down to hours of spare inventory on a days-use
basis, particularly in diesel fuel. When 85% of the things we buy in
WalMart come from China, the implications for trucks on the highway
system is profound. Those trucks are chugging along at three-to-six
miles per gallon, which is why we are setting an all time record in
the use of diesel fuel.
When asked "what do we do?" Simmons sounds more like a raving enviro --
or like me! -- than like a Houston investment banker:
Let's actually assume there is a reasonable chance this awful peak oil
and peak natural gas is real and do something about it, so if it turns
out to be real it isn't a show stopper and if we did something and it
turns out it wasn't real, we've bought ourselves an insurance policy.
He goes on to call for "the intensity of the way we tackled the Marshall
plan when we rebuilt Japan and Europe after Word War II," cutting oil
use in half by 2020.... [making] a major shift in the way we distribute
goods over long distance." CAFE standards. Telecommuting. Yipes -- the
guy's actually a locavore! "To have food taste great it has to be grown
locally."
But seriously, folks: It's important, and notable, that serious players
from the world of big oil are starting to pay heed, recalibrate how they
view
the landscape of risk and opportunity, and get those contingency
plans into gear.
I'd be the last to claim I could predict exactly how energy futures are
going to unfold. (Just have a look at the lively discussion generated by
a shorter version of this article, posted at
WorldChanging.com. Simmons is called an alarmist, and is defended as
highly respected. There's plenty of oil, or there's not. Nuclear is more
realistic future energy source than solar, or vice versa. Etc.) But I
can say this, with certainty: the world in which we will spend the rest
of our lives will be an uncertain and unpredictable place, perhaps more
so than any time in living memory -- and that's saying something!
Energy -- whether the concern is supply or price -- is just one
variable. Add to the mix: discontinuous political and technological
change; rapid population and economic growth in China, India, Brazil and
elsewhere; demographic shifts that yield younger populations in the
developing world and aging populations in the advanced economies;
potential political instability in critical regions, like, say, the
middle east; climate change -- or "climate weirding" as Rabbi Arthur
Waskow calls it -- and the potential disruption of the Gulf Stream; the
list goes on.
The point of the list is not to scare the pants off you -- though well
it might -- but rather to suggest that prudent leadership in the face of
uncertainty demands a flexible mind and a quiver-full of diverse
strategies. Since you can't predict the future, you need to be ready for
whatever future shows up on your doorstep. The advantage in this world
will go to the companies -- and countries -- that deploy the strategies
that are most adaptive to any array of potential futures, and that can
shift gears quickly as circumstances change. In the face of the
potential for $200 (or even merely $100) oil, prudent leadership will
reduce future energy costs through increased efficiency, and will reduce
reliance on energy imports through efficiency and energy independence
strategies.
I can think of only two reasons not to do so: 1) you believe
energy efficiency is too expensive to be a good investment in the short
term -- in which case, you're doing it wrong; 2) your economic
self-interest is too tied to the status quo to be able to see straight.
Wait, there's a possible third: you're absolutely certain prices will
drop and stay down (and I don't know about you, but I sure wouldn't bet
my retirement portfolio on anyone cocksure about anything.)
By the way, if you're not up on just how quickly this energy shift is
happening -- notwithstanding the macro trends heading us right into big
trouble -- be sure to track CLEANWATCH, the monthly newsletter on "clean
technology" from Clean
Edge. (Disclosure: co-founder Ron Pernick is on
Natural Logic's
advisory board; co-founder
Joel Makower is a
collaborator in the
S/BAR sustainable business rating system and other endeavors.)
CLEANWATCH is chock full of stories about growth in renewable energy
markets, advances in solar cell technology and, this week, California's
proposal for the
Nation's Biggest Solar Program: 3,000 MW by 2016.
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Gil Friend, systems ecologist and business strategist, is president
and CEO of Natural Logic,
Inc. -- offering advisory services and tools that help companies and
communities prosper by embedding the laws of nature at the heart of
enterprise. Sign up
online to receive his monthly column via email. Read Gil's blog
here.
To subscribe or
visit go to: www.GreenBiz.com
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