When it comes to energy, T. Boone Pickens is a man with his finger on the pulse of numerous industries.
Coal, oil, natural gas, nuclear and wind power, Boone has an opinion on all of it.
And the basis of all of his arguments is as simple and as it is undeniable. We consume more power than we produce.
Take oil for instance.
At present worldwide oil production stands at 85 million barrels a day. Meanwhile, worldwide demand is over 87 million barrels a day.
And as Boone is quick to point out 85 simply doesn’t cover 87 no matter how hard you try.
The result is a supply and demand imbalance that can’t be conned. That’s why even the slightest drop in output can send the price of crude much higher.
Correcting that imbalance then requires two things.
One is that demand must come down dramatically—to the tune of 2 million barrels a day. That’s highly unlikely, however, even if the U.S. goes into a recession.
In fact, according to the International Energy Agency (IAE) oil demand will increase by 2% this year no matter what happens in the states.
The second is that supply has to increase markedly to make up for that “oil gap”.
That is easier said than done. After all, new fields take years of development before they eventually can be brought to market.
Oil from ANWR, for instance, would take nine years to get to market if they started drilling there tomorrow. And we all know that’s not going to happen.
The same thing, of course, is true in Brazil, the Bakken, the Gulf Coast, and any other new oil-rich area that you can name.
And that doesn’t even consider the fact that many of the existing fields are already in a state of declining production. So even without the oil from any of these new finds, supply is headed in the wrong direction.
So you can definitely expect this imbalance to get worse in the short term-not better.
After all, the price of oil is high for a reason. It is a simple as supply and demand.
By the way, here’s a link to a great talk on energy that T. Boone Pickens delivered a few weeks ago. It runs long at over an hour but is worth every minute. Pickens simply covers it all.
Here’s the link: Boone’s outlook for oil, U.S. energy policy, and alternative energy including wind and solar power.
So if you really want to understand where we are in the world of energy today, it is must see TV.