LAS VEGAS () -- Besides talk of gold and other hard assets, the energy issue was addressed further Thursday at the Las Vegas Hard Assets Investment Conference.
Following on peak oil by Craig R. Smith, President and CEO of Swiss America Trading Corp. and co-author of Blackgold Stranglehold, the notorious non-believer of the peak oil theory, Dr. Michael Economides of the University of Houston & Texas Energy Center, delivered a presentation on energy and the peak oil debate. Later in the day, both Smith and Economides together participated in a discussion panel. Both addressed a number of important issues.
Smith stated that he believed America must act quickly to create a comprehensive energy program for the next 30 years, and he later stated that he saw America as being capable of being the world's energy leader. Along the lines of oil production, Russia has now surpassed Saudi Arabia as the world's largest oil producer, while the U.S. is currently in position number three.
Economides brought up the point that "You can't address the energy issue unless you address the transportation issue," a point that often seems neglected.
Smith said that "there's a perception that hybrid cars are the future," however the debate regarding the true numbers behind the energy it takes to mine the metal for a battery, process and manufacture it and then dispose of it when its charge capacity has reached its limit bring up questions on the utility of these vehicles. A number of studies point to the fact that in many cases a hybrid is not the best bet.
When driving 1,400 miles a month, gas prices would have to be $10 to make a hybrid economical, according to this article and many others out there.
Economides also stated that "Ethanol is the biggest scam in the history of this business," saying that it takes 1.6 gallons of gas to produce 1 gallon of ethanol, further referring to the ethanol industry as the "dot.coms of the energy industry."
Economides stated that "We are two headlines away from $100 oil," and there are three right now that the Houston based professor is focused upon:
- If Israel attacks Iran pre-emptively;
- An Al Qaeda terrorism attack on the Saudi oil infrastructure;
- Venezuelan president, Hugo Chavez, sells all of his oil to China.
Should any of these conditions occur, "the price of oil will go over $100 over night."
However, if the geopolitical world, nations, and politicians are able to avoid the aforementioned $100 criteria and other energy price affecting news, Economides said oil should hit its "equilibrium price" of $60 within a few months.
Today, crude for October delivery lost 37 cents to stand at $66.95 a barrel on the New York Mercantile Exchange after a low of $66.85.
Economides was bullish on natural gas stating that "I believe natural gas is going to take market share form gold," and saying that he saw only an upside in natural gas.
Smith also said that investors should not underestimate the potential of natural gas.
October natural gas fell 3.8 cents to $5.68 per million British thermal units today following a decline to $5.68.
A Good Question
Near the end of the discussion an audience member asked why if oil companies are finding record numbers of deposits and ways to extract oil from the ground is there still such a capacity problem?
According to Economides, it is because there has been no new refinery built in the U.S. in the past 28 years. He also said that the current condition of U.S. refineries is in poor health, pointing to last year's Texas refinery explosion as an example.
Smith mentioned a company in Arizona, Arizona Clean Fuels Yuma, which has been attempting to gather the appropriate permits to build a refinery for a number of years. However, according to Smith, the movements have been blocked largely in part to environmentalist concerns. Smith said that the refinery would virtually lower gas prices in the southwest and California overnight.
Smith also said that he believed a radical environmental movement has had the worst effect on the state of U.S. energy affairs. An interesting point to ponder in a time of energy insecurity.
Whatever your beliefs on the peak oil debate, it would be well advised to perform due-diligence on the other side's arguments. Not all that is perceived is real, and all that is reality may not always be the most efficient, environmentally safe or economical form of energy either.
A question arose from the audience on global warming, and both Smith and Economides stated that the issue had been receiving quite a great deal of attention since a certain ex-vice president released a film dealing with the issue.
According to Smith and Economides, the images of dense chunks of ice, breaking from their berg and crashing into the sea in a babble of cracks and splashes, were in fact not caused from an increased temperature, but from the natural ice-stress break-offs, the two said.