Energy’s Perfect Storm – and a Script for Hydrogen

Fear drives the political myth of energy independence! John Whitaker’s coined phrase “Energy Independence” from 1973 is often used today by candidates offering a better idea or outlining complex “roadmaps” which are neither understandable nor helpful in the day-to-day survival for the common man.

When President Gerald Ford asked America to seek “Energy Independence” in 1974, Hydrogen was a renewable resource with a twenty-year delivery date. The paranoia of scarce oil supplies and the gas-lines with alternate days of rationing based on your name did little (three years later) to sustain a national sense of urgency. Despite President Carter’s gathering of Governors and energy experts to write America ’s first Energy
Plan. Ronald Reagan was fixated by the possibility of gas lines that he sought to assure reasonable priced, available energy by setting the market forces free to seek their own level. the “unintended consequence” of decontrol was destabilizing OPEC — providing time for America ’s energy experts to bring on line those alternatives promised in 1974.

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The cost of oil will escalate and elastic availability of oil will be stretched by “peaking”; natural gas supplies will fail to meet production and supply demands; nuclear offsets already not being addresses will exacerbate a diminishing reliability; the failure of transmission line upgrade and replacement will soon converge causing rocketing prices and supply disruption. Any of which alone is troublesome but in combination will create economic and political instability.

A re-analysis of Hubbert’s Peak and the Simmons reports suggest that Saudi oil has peaked. Simmons did an analysis of data from technical papers and annual reports from Saudi Aramco, the national oil company along with other information. The implication for Saudi oil “peaking” is that once peaked the Saudi’s are on the other side of the production curve. Once an oil producer has peaked they have little elasticity other than cost and production levels. The new challenge for a peaked nation is to figure out how much to charge to maintain their economy as their supply declines. The Saudi’s can no longer indefinitely maintain increased production to off set price and supply considerations for the U.S. and its allies. Summing the Saudi situation Fareed Mohamedi, chief economist for PFC Energy said, “In a sense, it’s a perfect storm. Many factors have just all come together and pushed the Saudi ability to the wall.”

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