The Game Changer - Tata's Nano

In the Nevada debate Hillary Clinton and John Edwards both jumped on Barack Obama for supporting the Energy Bill passed by Congress and signed by George Bush last year. “That’s Dick Cheney’s energy bill” screeched HRC. Edwards joined (smarmed?) in as being against nuclear power. Well, the bill supports many new green technologies and encourages conservation. It also revisits nuclear power plants.

Barack made a mistake in comparing his candidacy to Ronald’s. For one reason, though not relevant here, RWR initiated his successful run for the presidency in the town where three civil rights activists were killed and buried in an earthen dam. There he boasted of “states rights” – an overtly racial and disgusting play for southern votes of a bigoted kind.

But his real error was linking “new” ideas to Reagan. We have known of our serious issue with energy supply since the Seventies. Richard Nixon, Gerald Ford, and Jimmy Carter all addressed the issue. Remember Carter declaring the moral equivalent of war in order to secure our energy future? Symbolically he put solar panels on the White House (and other federal government buildings). In a fit of short sightedness, and generational selfishness, our sainted Reagan tore the panels off the White House and unleashed an era of laissez-faire that left issues such as looming shortages of oil to the “free markets”. The worst nine words in the English language, he said, were “I’m from the government and I’m here to help”.

With that our civilization has gone on a thirty year oil binge. This orgy of consumption has led to gyrating, and incorrect, price “signals”. It has left us woefully unprepared in terms of alternatives to oil. Private industry has been unwilling to make the huge investments required while oil prices plummeted. This is where government investment and incentives should have been used.

The United States Federal Government had a role in preparing us for what is coming. It did not. From Reagan, through Bush 41, (yes) Clinton, and, Bush the government has done nothing. It has been business as usual. This is, it seems, what a new Clinton administration may well be judging by her debate answer above.

But we have run out of time for business as usual.

Imagine a standard distribution curve. The world is at the top of that curve in terms of oil production. The world currently “produces” approximately 82.5 million barrels a day of oil. It consumes 81 million barrels. (This all depends on definitions. Some of that production may just be dipping into existing stocks). These are rough numbers. And, now, the world faces declining supplies of oil. It was fun on the way up the slope as supplies outstripped demand. By the way, the US of A, with 2% of the world’s reserves and 5% of its population consumes roughly 25% of that number. We are the world’s largest consumer of oil. It is the basis of our growth and our “American Dream”.

The other side of the curve will be treacherous. As production declines (by as much as 6% per year), demand is set to soar. These declines will be irreversible - picture the standard deviation curve.

Should the Tata Nano (above), which sells for $2,500 US, catch on in India and, should China’s growth in automobile demand continue, there is trouble ahead. These countries have traditionally had little demand for gasoline. Should these two one billion plus populations achieve just a fraction of America’s auto ownership per capita, demand for oil could jump over 25 million barrels a day. In other words, the world would have to find another Middle East to supply the additional demand. This while the largest producing oil fields in the world are almost all in decline.

It -the new Middle East- is not going to happen.

Instead, we are going to be in competition for oil. War?

In that context, Obama’s decision to back the current energy plan, as a first step, is a testament to his judgment.

Hillary is business as usual. Obama represents the possibility of thinking anew. He also has the ability to inspire with words. A sea change is coming, whether we are ready or not, in energy availability. We need someone as president that can motivate our response.

Go Obama!