The Fuse

John Hofmeister: Energy Prices Are On Their Way Up

August 30, 2016

Guest Post by T. Boone Pickens | @BoonePickens

Thomas Boone Pickens, Jr., known as T. Boone Pickens, is an American business magnate and financier. Pickens is chairman and CEO of BP Capital, and the architect of the Pickens Plan, an energy plan for America.

Would you agree that a former president of Shell Oil knows a thing or two about the energy business? I thought you would, which is why I invited John Hofmeister to join me on my podcast. Here are five insights on energy today from this proven leader:

The price of oil will reach $80 a barrel this year and possibly go as high as $100 a barrel in 2017. The world’s most populous nations – India and China – are using cheap oil to grow their economies. And they’re not the only ones. So are many countries in Africa. Global demand on this level has to push the price up.

Anyone who says it costs the Saudis five dollars to produce a barrel of oil doesn’t know the energy business. This ignores the cost of their social welfare programs, and pumping oil out of the ground is just one of many costs to consider. How about the salaries of the engineers and technicians who oversee production? What does it cost to house tens of thousands of foreign workers? And what’s the price tag to protecting billions of dollars of pipelines and refineries from radical Islamists?

Let’s start a North American Energy Alliance under NAFTA. Mexico has enormous oil reserves, but PEMEX lacks the technical prowess of U.S. producers. Why don’t we figure out a way to trade our technology for energy security? We’ll all come out ahead.

Americans need to use more natural gas. We’re already seeing more and more heavy-duty trucks run on CNG. But what about using LNG and other natural-gas fuels for cars, light trucks, and SUVs?

Will politicians ever stop thinking like politicians? The typical political timeline is two years, i.e. until the next election. The typical energy timeline? Try 30 years. The sooner politicians recognize the need for long-term thinking when it comes to energy, the better off we’ll all be.

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