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Bob Williams
Bob Williams, director of research for PennWell Publishing's Oil & Gas Journal Research Center
Bob Williams is a Contributing Editor for PennEnergy. Previsouly, he worked as Director of Research for PennEnergy's Oil & Gas Journal Online Research Center and PennEnergy Online Research Center. He worked for 4 years for the US Department of Energy writing about energy R&D, including the power sector. Prior to that, he spent 24 years on the Oil & Gas Journal staff, and has authored and managed many ancillary publications and editorial products for PennWell over the years. For a detailed bio…


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Some wished-for New Year’s resolutions
January 6th, 2009
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Many of us have embarked upon that annual ritual of false piety and self-delusion known as making New Year’s resolutions. Yeah, sure, we pledge to lose weight, exercise more, eat healthier, save more money, reduce stress, be nicer, yada, yada.

While others wallow in sanctimony to better their lives, I prefer to wield it as a weapon to enlighten and entertain. Forthwith are my slightly apocryphal resolutions made on behalf of certain notables regarding the energy industry in 2009:

1. I will avoid making rash predictions about oil prices.

“Oil prices are increasingly likely to hit between $150 and $200 a barrel over the next 6 to 24 months.”
Goldman Sachs, May 6, 2008

The Wall Street titan of investment banking is now a traditional bank holding company and knocking at Warren Buffet’s door for a cash infusion.

2. I will be circumspect in promoting magic-bullet solutions for America’s energy problems.

“Building new wind generation facilities and better utilizing our natural gas resources can replace more than one-third of our foreign oil imports in 10 years.”

www.pickensplan.com

After issuing his challenge to Americans to dot the country’s heartland with wind turbines at a cost of $1.2 trillion, substitute gas-fired electricity with that wind power, and divert the domestic gas hitherto burned in those power plants to natural gas-fueled vehicles as a means to end the US “addiction” to foreign oil, T. Boone Pickens’ energy hedge fund lost $1 billion, about a third of which was his own money. Pickens then predicted oil prices would end the year at around $125 per barrel (see Resolution No. 1). And his own flagship project, a $10 billion wind farm in Texas, is on hold because natural gas prices have halved.

3. I will think long and hard when hedging my bets with my money.

“We believe we must invest the necessary capital to more fully capture the upside of our new opportunities. We remain focused on per-share value creation and we believe our shareholders will benefit from our increased investments in these new discoveries and projects and in our most important existing plays.”

Aubrey McClendon, Mar. 24, 2008

The Chesapeake CEO subsequently sold almost all of his own stock in the company to cope with a personal margin call; the stock had been valued at $2.2 billion when he bought the shares on margin. Chesapeake also slashed its drilling budget (focused mainly on shale gas plays) by $10 billion in 2009-10. And McClendon was the driving force behind CNG Now, an initiative that complemented the Pickens plan on vehicular natural gas (see Resolution No. 2).

4. I will think even longer and harder when hedging my bets with company money.

Tom Kivisto, SemGroup LP

According to statements in the Chapter 11 bankruptcy of SemGroup LP, co-founder and former Pres. Tom Kivisto used money loaned to him by SemGroup to make personal trades on oil futures markets. SemGroup bet oil prices would drop when they more than doubled in the first half of 2008 (see Resolution No. 1). The margin calls amounted to more than $2 billion, including $290 million from Kivisto. He was subsequently sacked. The company is still struggling to reorganize and may have a buyer but remains under federal investigation.

5. I will walk the talk, i.e., not be a flaming hypocrite.

“…Billions of dollars of new investment are flowing into the development of concentrated solar thermal, photovoltaics, windmills, geothermal plants, and a variety of ingenious new ways to improve our efficiency and conserve presently wasted energy.”

Former US Vice-President and resident National Scold Al Gore, July 17-18, 2008

According to the Tennessee Center for Policy Research, since the release of his Oscar-winning documentary, An Inconvenient Truth, energy consumption at Al Gore’s Tennessee mansion increased from an average of 16,200 kW-hr per month in 2005 to 18,400 kW-hr per month in 2006. That’s 20 times as much electricity consumed in a month as the average American household uses in a year. And not a windmill in sight. At the same time, Gore’s mansion burned more than $1,000 of natural gas per month.

6. I will not put all my eggs in one basket. Nor eliminate on your leg and tell you it’s raining.

“Today I challenge our nation to commit to producing 100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years. This goal is achievable, affordable, and transformative.”

Former US Vice-President and resident National Scold Al Gore, July 17-18, 2008

Even ClimateProgress.org says a more realistic, but still ambitious, goal would be 50% renewable electricity sources by 2020. The US Energy Information Administration, however, projects that renewable power will have a US market share of 12-13% in 2030. Today renewables account for 9-8% of US power, and two-thirds of that is conventional hydropower—not solar or wind. Also see Resolution No. 2.

7. I will not, repeat, NOT regurgitate that lame, beating-a-dead-horse-after-it’s-already-glue metaphor of a “Manhattan Project” or “Apollo Project” to describe solutions to America’s energy challenges.

“Ten years is about the maximum time that we as a nation can hold a steady aim and hit our target. When President John F. Kennedy challenged our nation to land a man on the moon and bring him back safely in 10 years, many people doubted we could accomplish that goal. But 8 years and 2 months later, Neil Armstrong and Buzz Aldrin walked on the surface of the moon.”

Former US Vice-President and resident National Scold Al Gore, July 17-18, 2008

Here’s an excerpt from the New York Times’ Andy Revkin blog, in which he annotates (http://dotearth.blogs.nytimes.com/2008/07/17/the-annotated-gore-climate-speech/)
Gore’s July 17, 2008, speech in Washington, DC, that called for an Apollo Program-style government initiative to convert all US power to renewables within a decade:

“Many scientists and engineers have looked to the Apollo program as a metaphor, but stressed that the energy transformation is a far greater challenge. Here’s what one solar expert told me when I interviewed him for a climate story in AARP Magazine: ‘We already have electricity coming out of everybody’s wall socket,’ says Nathan S. Lewis, 51, a chemistry professor who codirects the Powering the Planet project at Caltech. ‘This is not a new function we’re seeking. It’s a substitution. It’s not like NASA sending a man to the moon. It’s like finding a new way to send a man to the moon when Southwest Airlines is already flying there every hour handing out peanuts.’”

8. On a personal note, I will try not to pick on Al Gore so much in 2009.

Oops.

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