White House Chronicle

News Analysis With a Sense of Humor

It Won’t Be the End of the World, but $5 Gas Is Coming

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May 21, 2011, according to a loosely-organized apocalyptic Christian movement, will be the “end of days.”

On or about that same date, the price of oil in the United States will begin to climb to $4 a gallon, according to two savants of the oil industry.

The former is highly unlikely but the latter is very probable.

The escalation in the price of oil is predicted by the legendary oil man T. Boone Pickens, known for his financial acuity as well as his oil expertise, and John Hofmeister, who retired as president of Shell Oil Company, to sound the alarm about the rate of U.S. consumption of oil.

In an interview with a trade publication, Hofmeister predicted that oil would rise to $4 a gallon this year and to $5 a gallon in the election year 2012. Separately, Pickens—who has been leaning on Congress to enact an energy policy that would switch large trucks and other commercial vehicles from imported oil to domestic natural gas—predicts that oil currently selling for just over $90 a barrel will go to $120 a barrel, with a concomitant price per gallon of $4 or more.

The Obama administration appears to have been slow to grasp the political implications of an escalation in the price of oil. When asked about it, outgoing White House Press Secretary Robert Gibbs referred the questioner to the Department of Energy.

Not everyone is alarmed by the incipient rise in the price oil. Republicans, who are especially close to the oil industry and its Washington lobby, orchestrated by the American Petroleum Institute, think that a great deal of hay can be made while this particular sun shines. They plan to attack the administration for spending too many resources on alternative fuels, over-regulating the industry, and keeping too many federal lands away from oil prospecting. They also accuse the administration of being too frugal with its release of drilling areas in the Gulf of Mexico and on the two coasts, as well as Alaska.

The Republicans have unlikely bedfellows in their quest to politicize the price of oil. They are joined by environmentalists who have long believed that only high prices will break America’s passion for the automobile.

Environmentalists have long advocated European-style taxation to drive motorists out of their cars and onto buses and trains.

A third interest group that will take some pleasure in rising oil prices are those who are invested in alternatives such as ethanol, oil from algae and electric vehicles.

Meanwhile, the International Monetary Fund is keeping an eye on the price of oil, according to Caroline Atkinson, director of external relations at the IMF. She told a Washington press briefing that the IMF is particularly concerned with food and other commodities that are directly affected by the price of oil.

Hofmeister, who now heads the non-profit Citizens for Affordable Energy that advocates energy development in all forms, believes that the United States could increase oil production from the current 7 million barrels per day to 10 million, half of its consumption. He told an interviewer from Platt’s, an energy publisher and broadcaster, that we were “essentially frittering at the edges of renewable energy, stifling production in hydrocarbon energy,” which he said could lead to blackouts, brownouts, gas lines and rationing.

There are already signs that the Republican-controlled House of Representatives is planning a big push for hydrocarbon energy. An indication of this comes from Rep. Fred Upton (R-Mich.), a one-time global-warming believer who has dropped that issue from his agenda. He is the new chairman of the House Energy and Commerce Committee.

In periods of high gasoline prices in the past, presidents have found there is very little that they can do. Their options are to reduce the tax on gasoline, sell oil from the Strategic Petroleum Reserve or the Naval Petroleum Reserve. President George W. Bush went a step further: He went to Saudi Arabia twice to ask the Saudis to increase their rate of production. Twice he came back empty-handed.

All of this would be good news for the oil producers and especially those troublesome players, Russia and Venezuela.

Of course, if you believe the human endeavor ends on May 21, better fuel the SUV and hit the road.

The Pickens and Obama Energy Plans: How Smart Are They?

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The billionaire T. Boone Pickens and President Barack Obama have something in common: a plan for saving us from imported energy. In doing so they hope to reduce air pollution, create jobs and head the country towards a more sustainable energy future.

But Pickens and Obama do not have the same plan. In fact, Pickens has been critical of Obama’s plan; and Obama has been silent on Pickens’ plan.

Where both plans converge is on the billions of tax dollars that will be needed to upgrade the now ramshackle transmission system. This is often called the grid. The fact is it is not a grid at all, but a series of local grids that are sometimes interconnected. Texas is not connected to the rest of the U.S. system, for example.

The first problem with the two plans is that they are aimed specifically at foreign oil but deal with electricity, which we import in small quantities from Canada. Electric imports are not a problem. Both have ideas about how a greener, smarter electric grid will help toward cutting the astonishing amount of oil–20 million barrels a day–we consume in the U.S., 70 percent of it from overseas.

The Pickens plan is fairly straightforward. He wants to build wind farms up the spine of the United States, from Texas to Canada–hundreds of thousands of windmills in the best wind belt in the country. This electricity will be transported from the relatively underpopulated Intermountain West to the heavily populated coastal cities of the East and West.

This electricity would be moved on the new smart grid that everyone is sure is desirable, and on the way if the government foots the bill and there is enough use of eminent domain to force the new lines across private property. One of the reasons the grid is not larger and more flexible today is that it often takes as long as 20 years to overcome the local protest and litigation. Even the abusive use of eminent domain does not block lawsuits over issues like the health effects of large power lines.

To Pickens, this electricity will make it possible to back out the 30 percent of natural gas now being used to generate electricity; and that resource will substitute for oil in large trucks and eventually domestic autos, after the new filling stations are built.

Neat, huh? Maybe in 25 years?

Obama’s plan is more ambitious, but less specific. It seeks a huge increase in wind generation; the use of solar panels in cities; and, of course, the building of a really smart grid, which will give consumers the option to turn off their appliances when electricity is expensive and back on when it is cheap, mostly late at night and early in the morning–midnight suppers and 3 a.m. showers. The relief from imported oil comes in the use of electric cars, hybrid cars and possibly the electrification of some rail lines, where high-speed trains are envisaged.

Under the Obama plan and with his grid, your house will be monitored 24 hours a day for energy usage and it will get helpful directions on energy conservation. Ergo if you are growing plants in the basement, you might not want to sign up. Privacy is an issue. Also, will we go smart? Those who cannot program their VCR might want to dodge the smart grid.

There will be winners and losers. The winners will be the equipment manufacturers (lines, poles, meters, wire, insulators, turbines), civil engineers and, of course, lawyers and consultants. The losers? If the scheme collapses under its own grandeur, it will be taxpayers; job-seekers and ultimately the environment, if the utilities keep burning coal for more than half of their production. If the windmills are built under either scheme, birds and bats will get it. Both species are already slaughtered by the tens of thousands by flying into wind turbine blades.

While gasoline is cheap, the lights are on and the thermostat is set either too low or too high, it is going to be hard to tell people they have to change–and pay for it.