Are We Running Out Of Oil? I Hope So!

In a lengthy post last week I said the U.S. had the ability to reduce its dependence on oil by 30-50% measured by per unit of GDP over the next thirty years. That is a swag but it's likely an understatement. Peak oilers or those who believe economic catastrophe is coming because the world is running out of oil have nothing better to do than play Chicken Little. Or, put another way are modern day Malthusians. They are missing the transformation taking place right before them. Personally, I look forward to the day we have no more oil. It can't come quick enough. But, it likely won't come at all because peak oil has no scientific basis. We've made many fools famous this cycle with Wall Street monetizing hard assets at a frenetic pace and with tremendous financial leverage.

Watch the video above. Stirling Energy is a company I first learned about in a BusinessWeek article a handful of years ago. Remember when you fried ants with that magnifying glass as a kid? Remember your ninth grade math when you learned to calculate the focal point of a parabola? Stirling is simply concentrating the sun's energy onto a gas chamber that is then heated by the sun to drive pistons. Pistons turn a shaft where a motor is attached. It's basically a steam piston engine and similar in concept to the action of your car's engine. Voila! Free energy. This is simple technology but with sophisticated modern day control systems and reliability. So, listen to what the CEO says near the end of the video. One hundred miles square of desert could be used to replace all of the energy needs in the U.S. The actual area of unusable desert land, costs and effort to accomplish this are a rounding error. Now granted, that isn't going to happen over night and we would still have many issues including the storage of energy for off peak hours but this is a very viable alternative energy source that will only be improved over time. As will its deficiencies. And, this is production level technology being deployed as I write this. It's not some future idea. Similar capabilities are being developed around the globe at a rapid pace. In Spain they are using similar technology to drive a steam turbine that typically has a better efficiency profile. I'm not close enough to the technologies to know the intricacies but it's exciting. And, this is simply one small cross section of energy research and capabilities being undertaken.

This particular technology may play a vital role or it may be superseded by something far superior. But, in any event solar power will play a role in future energy production. So, what else could you imagine with some type of solar energy system such as this? Smaller versions for your home if technically viable? Your city? Versions sitting on top of high rise condominiums and office buildings? Never buy electricity or heat again? Recharge your electric car at home......for free? The grocery store installs a system on the roof and allows you to charge your car for free while shopping in the store? Why free? An incentive to get you to shop at their store. A system on the roof of the building where you work? You recharge your car while at work. And, what does a distributed energy grid mean for the utility industry? Competition. Competition that will force them to change or die. There is so much technology in the process of being mated to green solutions, it is quite amazing.

All of the people who believe the U.S. is going the way of the dodo bird are going to eat alot of crow at some point. The U.S. is not going away any more than France, Germany, Australia, Great Britain, Japan or other democracies are going away. Are there intermediate term problems? Sure. And, unfortunately, most of the problems are still not apparent. And they are not trivial. But, what also is still not apparent is many of the problems are global or much worse in other global markets. Or many global markets have larger problems. Will it cause economic strife? Yes and it could be quite significant. But, just when everyone starts babbling about the U.S. running an unsustainable trade deficit, the U.S. ist kaput, Americans are idiots or the dollar is going to zero we will eventually see the trillions of petrodollars sent to Venezuela and the Middle East and all of the trillions in military budgets spent defending those interests are going to be spent as investment in the U.S. as well as the rest of the world. And, just as it is an annuity for petroleum producers today, it will be an annuitized investment in global economies.

What better creator of sustainable wealth and jobs than renewable energy. That isn't a question. That is a fact. Think about it. Constantly improving technologies and infrastructure which adds efficiency or productivity to harvested energy dependent on these very factors. Annuitization is a very important concept that I don't believe most people have truly grasped yet. The implications create massive shifts in global economics and, therefore, volatility. Who has the most to gain? The U.S. for at least five major reasons. One, because we are resource rich and land rich; two, because we spend such a massive amount on national defense and many of those dollars won't be needed to protect international energy interests; three because we are the world's energy gluttons and therefore have the most efficiencies to be gained; four, because the U.S. companies will be a primary provider of these capabilities to the global economic community; and five because the U.S. has the most innovative and flexible economic system in the world. So, it will respond more quickly being an early innovator and adopter. And guess what? It really doesn't matter who is elected President or who wins the Congressional elections because progressive state governments and free markets have usurped Federal power by leading this movement. *******Thank God for the brilliance of those who founded this country and who advocated state's rights as a check against federal hegemony. Yes, a little known fact is that checks and balances were meant to be not only between the three federal branches of government but also against concentration of power at the federal level should all three branches come to believe in their infinite brilliance. Who cares if Washington politics are a mess? It has always been this way to varying degrees. Eventually it will fall in line when politicians wake up to the fact that their version of reality doesn't exist any more or when we reach crisis. And as polls show time and time again, their version of reality doesn't exist anymore.*******

We don't need government disincentives and economic punishment for businesses and entrepreneurs as policy. That is, unless government wants employers to lay off employees and to stifle business creation. I see many aspiring Presidential politicians making statements about what they will and won't support as far as energy technology. This is a dire mistake. The ingenuity, creativity and industriousness of humanity and markets will work their magic without politicians and their centrally planned solutions to capitalism that most often turn out to be inhibitors. Government has many roles in society but politicians, in particular, determining whether the world adopts nuclear, solar, biodiesel or any other energy sources is not one of them. Incenting the markets to work is a role government can play but there is no way a bureaucrat can or should determine winners in the market place and, therefore, should not be adopting any policies attempting to sway choice or market dynamics based on personal opinion of a topic they know little about. To assume that politicians are able to set technology direction or market direction is to assume a single entity or person can know more than the cumulative consciousness of the world's engineers, scientists, entrepreneurs, business leaders, citizens, inventors, capital markets and the like. That is a universal untruth. It is also a major reason why Chinese communism or fascism or whatever it is, will fail.

So, what will happen to the major oil producing economies of OPEC when energy independence starts to crystallize as a reality? That's for another post but at some point we will will likely be seeing the ultimate top in oil and those economies as I wrote in the last oil post. This massive oil bubble today could indeed be the ultimate peak of OPEC country wealth without political and economic reform. Or maybe it will be five years from now. Or whenever. But, it is coming and there is nothing anyone can do to stop it.

It might have been a novel concept if a politician would have used this approach as our foreign policy to rid ourselves of vested interests in repressive states. To use the intellectual and industrial might of the free world to become energy independent. Well, the markets are doing exactly what many erroneously looked and still look to politicians to do. But, then it almost always works that way. Of course, who knows. After 9/11 maybe the U.S. government started buying oil futures to drive up the price in order to get free markets to do exactly what they are doing. Or have given financial firms a free pass to invest with abandon in energy markets to drive prices higher to stir the juices of innovation while providing substantial profits for American companies in the interim. Okay, it's an interesting thought but as the AFLAC goat said, "Nah, Nah, Nah.". (I'm sorry but every time I see that commercial I have to bust a gut.)

Peak oil? Bring it on! The economic benefits are beyond most anyone's imagination.