Dear Wealth Daily reader:
In the past 2 weeks, we’ve been inundated with two specific energy proposals to kick America’s foreign oil addiction.
One has come from Newt Gingrich’s American Solutions advocacy group. You may have seen the commercial for the petition. The energy campaign’s motto is “Drill Here. Drill Now. Pay Less.”
Newt’s plan calls for drilling basically everywhere American oil companies can, domestically. There’s a heavy emphasis placed on the oil shale in the Rocky Mountains.
For more specifics on this proposal, go here: http://www.americansolutions.com/
The other energy plan comes from Texas oil billionaire T. Boone Pickens. Simply called the Pickens Plan, Boone calls for a massive construction boom in wind turbines, concentrated solar farms, and a conversion to natural gas.
You can see Boone’s plan here: http://www.pickensplan.com/
Now, I’ve been asked a hundred times which of these energy plans I think will work. The answer is both.
However, I should tell you that Newt’s Drill Here Drill Now energy plan is a drop in the bucket… and wouldn’t even come remotely close to ending our dependence on foreign oil.
“But Brian, doesn’t Rocky Mountain shale contain nearly 3 trillion barrels of oil?”
Nobody really knows.
But even if it did, it wouldn’t matter.
Why?
Because like my colleague Chris Nelder is so fond of reminding people, “it’s not the size of the tank, it’s the size of the tap that matters.”
I mean, you can get water out of a brick. But it’s not necessarily the best method to get water.
It’s the same with oil.
Oil production is about flow rates.
For decades we’ve been consuming oil that literally gushed out of the ground with very little effort.
Today that easy-to-get-oil is gone. And it’s gone forever.
With 1 trillion barrels of the easy oil already consumed, the world is going after what’s left… the harder-to-get oil. And that’s the problem with Newt’s plan.
If the geology constraints are such that you can only pump 50,000 barrels per day out of a 10 billion barrel recoverable oil formation, you’ll got over 500 years of life from that well.
But considering that the US imports 15 million barrels of oil per day, you have to find some super giant oil foods where the flow rates are ridiculous. That’s why domestic oil production will replace only a fraction of our imports.
In fact, let’s put that into perspective. To produce ALL the oil we consume here in America (21 million barrels per day), we need to find the equivalent of 2.2 Saudi Arabias. And it has to be the kind of oil that gushes out of the ground!
That’s the difference here.
Getting oil from shale is going to be an arduous task.
Having said that, we need to do everything to buy ourselves time. We need to drill domestically onshore and offshore. We need to build wind and solar farms. We need to build nuclear power plants… geothermal plants… everything.
And more importantly, we need innovative entrepreneurs to come up with the next primary and, yes, cheap energy source. Because mark my words, whoever comes up with the next cheap primary energy source is going to have the most robust economy in the world.
Cheap energy lubricates the economy. Period.
The bull market in energy is just beginning.
Brian Hicks
P.S. By the way, Chris Nelder and I have come up with our own energy plan. You can view it here: http://www.angelnexus.com/o/web/6774
The Gingrich & Boone Pickens Energy Plans
