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Corn+Soybean Digest

The Road Warrior Of Agriculture

Straight Talk About Energy: Rotating Chaos

Over the past 25 years, U.S. demand for energy has increased by 23% while supply has increased by only 16%. The U.S. imports 17% of the gasoline and 58% of the petroleum used here. The American public takes energy for granted and doesn’t realize how cheap energy is in the U.S. compared to other nations. Our population became complacent concerning cheap energy. When I quiz current audiences concerning the price of a barrel of oil in 1998, the common response is $30-35/barrel. Think again. It averaged $8.58/barrel in 1998. This led us into a reactive strategy dependent on foreign oil rather than a proactive energy program.

Many blame the oil companies for excessive profits. However, in the third quarter of 2005, the oil and natural gas industry ranked 7th in industry profits behind bio-tech, banks, software, food/beverages, household products and semi-conductors.

On the demand side, there are 700 million light cars and trucks in the U.S. today and by 2020 this will increase to 1 billion. Seventy percent of energy workers are between age 41 and 65, with a large percentage in the 55-65 age group. A worker crisis could emerge in this industry.

Surprisingly, the U.S. is the third largest oil producing country in the world and the U.S. imports the most oil from Canada and Mexico. Bottom line, the “red states” politically produce energy while the “blue states” consume. If all energy and power were converted to BTUs, the state of Wyoming would produce more than Saudi Arabia.

What is holding back the U.S. from growing its gas and oil production?

  • Excessive regulations
  • Inefficient permitting procedures
  • Lack of land and lease accessibility

The emerging and developed countries of the world will have rotating chaos until some of the above are corrected. Developed countries will need to implement an aggressive plan of alternative energy sources to circumvent a worldwide economic slowdown.

On The Road

I encourage my readers to take a trip across the Black Hills of South Dakota and Wyoming. It is great to see the horizon and hear the silence. By the way, North America’s largest open coal mine is in northeastern Wyoming. What a huge operation.

The Road Warrior of Agriculture

My e-mail address is: sullylab@vt.edu

Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups.

To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.

http://www.cornandsoybeandigest.com

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