by John M. Curtis
(310) 204-8700

Copyright July 22, 2008
All Rights Reserved.

estifying before the Senate Homeland Security and Government Affairs Committee, billionaire Texas oilman T. Boone Pickens warned about $300 a barrel oil, unless Congress adopted his new energy plan. Blaming skyrocketing prices on dwindling supplies and U.S. dependence on foreign oil, Pickens advocated renewable energy, especially windmills and natural gas. Pickens runs a multibillion hedge fund BP Capital, making beaucoup bucks from wheeling-and-dealing in oil. “If we continue to drift, oil will hit $300 a barrel in 10 years,” Pickens told lawmakers in his familiar Texas drawl. Already building a “wind farm” in North Texas, Pickens stands to make millions on wind-generated electricity by 2011. If you listen to Pickens and former Vice President Al Gore, you'd believe the planet has come to the end of the oil supply and faces imminent destruction.

      Those same gloomy predictions were made in 1980 by former President Jimmy Carter and independent presidential candidate John B. Andersen (R-Il.). Like Gore, who likes to cite scientific research to support his theory about global warming, Anderson quoted American Petroleum Institute and Princeton University studies, blasting the late President Ronald Reagan for holding optimistic views about the price and availability of oil. Andersen warned the world would face shortages by the late ‘80s, as demand for oil exceeded available supplies. He predicted world demand would exceed 132 million barrels a day, falling 50 million barrels short of current use. Publicly traded energy companies have clever ways to hype the price of oil, frequently blaming skyrocketing prices on political instability, natural disasters, pent-up demand, refinery fires or other convenient excuses.

      Pickens wants lawmakers to accept that the world is running out of oil. While there's nothing wrong with pursuing renewable commercial energy, there's something very wrong with brainwashing people into believing a myth that helps the profit margins of major energy companies. California found out the hard way in 2000-01 when out-of-state power companies turned off the juice, quadrupling electricity rates and pushing the state toward bankruptcy. Pickens ignores the role of energy speculators in driving the price of oil to record highs, hitting $147 July 11. While a plummeting dollar hasn't helped, oil speculators have accounted for a substantial part of the latest price jump. Pickens has no answer for how the shrinking dollar and speculators drive prices to new heights. Despite record crude oil prices, major oil companies continue to rake-in record profits.

      Vast oil discoveries of Barzil's coast may exceed those of Saudi Arabia, offering proof that the planet continues to swim in oil. Brazil runs its autos and industry off sugarcane-based ethanol. Keeping Brazil's discovery out of the headlines helps keep oil's price artificially high. Refinery fires and breakdowns, hurricanes and terrorism in the news drive prices upward. Pickens, who drives a natural gas-powered Honda, urges car companies to build more natural gas-fired autos. U.S., German and Japanese automakers haven't been too enthusiastic, partly because oil companies haven't jumped on the bandwagon. Finding natural gas fueling stations, while more accessible than hydrogen, isn't easy. None of the major gasoline retailers have installed natural gas at existing fueling stations. Pickens, like others, blames the Iraq War and Mideast instability on U.S. fossil fuel dependency.

      Major oil companies aren't hot on commodities that don't sell. As long as fossil fuels are relatively cheap, they won't invest in alternative fuels, neither will automakers whose cars have to be fueled at current filling stations. Busy selling his alternative energy plan, Pickens won't deal with two main factors inflating crude oil prices: (a) devaluation of the dollar and (b) unregulated speculation in oil markets. When the U.S. ends the Iraq War, it's likely the dollar will rebound against foreign currencies. When Congress changes margin requirements on oil trading less speculation will take place. Whatever happens to petroleum supplies and world demand, improving the dollar and ending speculation should drop the price of oil. Dropping oil prices should drive down pump prices, assuming major oil companies don't continue gouging consumers, business and industry.

      Pickens needs to stop buffaloing Congress and tell the whole story to lawmakers trying to deal with skyrocketing fuel prices. No one at this point should buy the supply-and-demand theory for rising pump prices. Whether or not fossil fuels cause global warming has nothing to do with the price of refined petroleum products. Major oil companies and refiners routinely set profit margins and pass rising crude oil prices on to consumers, business and industry. Improving the dollar's value and controlling today's largely unregulated oil markets should help bring oil prices back to earth. Oil companies will still find any excuse to raise prices. There's no need to jettison fossil fuels when they provide cost-effective, energy-efficient fuel for private and commercial industry. Developing alternatives and more fuel-efficient cars should eventually drop the price of oil and refined products.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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