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Implementing Pickens' Plan for Public Energy Policy
by: William Ellard posted on: July 16, 2008 | about stocks: APA / CHK / DVN / ERF / FAN / PVX / UNG / USAP / XTO

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First, let me applaud T. Boone Pickens for putting all this energy, time and money into a very important issue. His plan is to use wind power to replace 20% of the US electric grid, freeing up natural gas to be used in the US transportation fleet. First lets recap a few points of Pickens' to ponder:

* US oil production peaked in the 1960s and 1970s.

* US oil production is now at 5 million barrels a day, the lowest output in over 50 years despite record real prices - the US consumes over 20 million barrels per day.

* The US consumes 25% of the world's oil, with only 4% of its population.

* The US will send $700 billion dollars out of the country per year to buy oil.

* Projected over the next 10 years, the cost for oil imports will be $10 trillion — the greatest transfer of wealth in the history of mankind.

* World oil production peaked in 2005 at about 85 million barrels per day.

Much of the $700 billion the US spends to buy foreign oil does not go to unstable countries. Canada and Mexico are two of our largest suppliers. But billions of dollars do go to countries that may fund anti-US activities. Bottom line: $700 billion is leaving the US economy.

How has the US boxed itself into this nasty oil corner? The answer is the power of the monopoly. Over the past 100 years the US has built (with tax payer dollars), an enormous vehicle transportation infrastructure based on only one energy source - oil. This oil infrastructure monopoly will not allow competition, as the barrier for entry is just too high.

Free market systems no longer work with a publicly funded monopoly in place. We already have many cheaper alternatives to the oil based vehicle. One can fill up a natural gas vehicle for under $2 a gallon. Electric vehicles cost less than $1.50 to charge.

Eventually economics will force the US energy vehicle infrastructure to move away from oil, but during this time we are putting ourselves at a huge national security and economic risk. A small conflict in the Middle East could close the Straits of Hormuz for months. This would not only create huge price jumps in oil products but create fuel shortages and rationing that would send the US into a long-lasting depression.

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