Monday, September 29, 2008

Energy Decision Makers' Dilemma: How Much Will Oil Cost Next Year? In 5 Years? In 20?

Let's say you run DOD. Today you observed that when congress voted down the Wall Street bail-out plan the stock market fell 700 points. And as it fell, it took the price of oil with it, over $10, so a barrel of oil is once again priced at less than $100. Feels almost like a bargain. When economists forecast a slowing economy, they also forecast lower demand for energy. But given all the efforts you've set in motion recently to add energy efficiency and conservation to policy, do you consider today's events to be good news or bad news for the department?

If you'd read Simmons' 2005 book "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," your take on oil price fluctuations is informed by a more powerful basic trend. Simmons spent years studying peak oil scenarios, paying particular attention to what the Saudi's said they have in reserve, versus what the hard data shows. And he's quite convinced there's a heck of a lot less in Saudi oil fields than the Saudis (and the big oil execs) are claiming is there. A question haunting you today, then, even as oil settles below $100 per barrel, might be: "am I doing enough to make sure DOD can fulfill its missions when oil is $200 per barrel ... and maybe much more than $200?" See this.

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