Ray Rothrock

Noise on the Hill

In Energy on March 9, 2011 at 6:57 pm

Secretary Chu in September 2008 was quoted as saying we need to raise the price of gasoline in America.  Republicans are all over this today as a negative, citing that this proves President Obama is bad for America.  Nothing could be further from the truth, BUT the truth requires a broader context and understanding.  Sound bites are hard to fight off but as Americans, we should think more deeply about it.

DOE recent response to this acqusation by the Republican leadership is that higher prices of gasoline will cause problems for Americans.   Duh.  Yes, higher prices cause problems for Americans.  Higher prices also will make Americans more sensitive to this precious substance called gasoline.  I think the pricing signal is the most powerful signal out there.  It tells people exactly what things cost.  Perhaps, even, the general public will realize that foreign oil is a uniquely American addiction and that the US Government needs to do everything it can, I MEAN EVERYTHING, in its power to reduce the importation of oil.  So, that’s where the discussion begins – what can the USG do?

American’s, and the USG and the Oil Industry of America do not control the price of oil, or the ultimately the price of gasoline at the pump.  We use way more than we produce, so we are hostage to the global price set by OPEC.  The only way to really create a credible threat to OPEC’s price is to come up with oil substitutions or simply stop using it in the amounts we do.

Substitutions are in development.  My firm, Venrock, has two companies working on this problem.  Because of the magnitude of the oil consumed (about 23 million foreign barrels per day), it will take a long time to substitute this amount.  How much is 23 million barrels.  23 million times 42 gallons per barrel is just shy of one billion gallons of oil per day.  ONE BILLION GALLONS OF OIL PER DAY.  To stop using this much, we can also substitute other means of propulsion, like electric cars.  But electric cars are still only a minor amount of the market and have a long development time.  Much is required before my dad buys one.  Nonetheless, we must invest in them and start down that long development path.

Presently gasoline is well over $3 per gallon.  $3.39 in Texas and $4.39 in California.  CNBC say $4 per gallon is a magic number that causes change.  Well, the last time gasoline was $4 or more (2008) American’s changed their habits.  I read that Prius sales were up 70% for February 2011 from last year.  Amazing.  We are already reacting.  So, while American citizens take things in their own hands and change their life, Capital Hill hunts for scape goats and bickers about who is at fault.  So, Mr. Speaker, if Sec. Chu were not in charge, who would you put in charge to affect your agenda?  It takes all of us to make the necessary changes – the average citizen in their daily life, the development of substitutes for oil, and the efficiency and alternative propulsion for the car fleet.  This is the greatest problem facing America.

I could go on and on.  My point is this.  There are many things the USG can do to begin to reduce the addiction on oil.  I’m always for more.  I think they are doing a lot.  But in case the Republicans think not, just call give me a call.  I’ll straighten them out.

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