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Pickens takes up a cause

July 9th, 2008 · 6 Comments

Here at shareholdersunite, we know Pickens mostly because his 3M shares in InterOil, are most prominently featured company (rumor – we cannot vouch for it’s accuracy – has it that he was involved in orchestrating the $95M private placement of debentures for the same company a couple of months ago). 

He’s a billionaire, a legendary oil investor, and has a masters in geology (facts that have made us more comfortable extolling the opportunities of InterOil shares) But he has greater fish to fry.

He’s not happy with US energy policy. But rather than just mope about, he is actually mobilizing some of his great fortunes to do something about it. We are breaking as a nation, because we now spend $700B on oil each year, he argues (For convenience, we’ll leave out the 3T or so that the Irak war will cost according to Nobel prize laureate Joseph Stiglitz  and Linda Bilmes in a book aptly titled The Three Trillion Dollar War).

Oil prices will be at $150 by the end of the year, is his intimidating message (leaving aside that we’re almost there already, a sigh of relief, no further price rises! You might have noticed we expect prices to fall, but we’re no T Boone Pickens).

And indeed, $150 oil, that’s bad. What to think of the following snippet, from The New York Times, 14 October 2001:

”If bin Laden takes over and becomes king of Saudi Arabia, he’d turn off the tap,” said Roger Diwan, a managing director of the Petroleum Finance Company, a consulting firm in Washington. ”He said at one point that he wants oil to be $144 a barrel” — about six times what it sells for now.

Bin Laden has won after all! No wonder Boone is upset. But what is he going to do about it? Well, a huge PR campaign, with a couple of action plans:

  • After having just made a 2B bet on wind energy, (you have to say, this is a stand-up guy who puts his money where is mouth is, or is it the other way around?), he extols its virtues. And he’s right, of course. Much more should be build
  • He deals with the somewhat awkward fact that most oil goes into cars with the following ingenious scheme: Let wind energy produce electricity, the gas we safe (from converting electricity centrals running on natural gas) go into cars
  • This is also a good idea, at least in principle. It also has the pleasant and not unimportant side effect of cleaning urban air (according to a Dutch study, living close to a busy road cuts 7-8 years of your life expectancy, even worse than smoking)
  • One problem is the lack of ready made vehicles that can drive on compressed (CNG) or liquid (LNG) gas. There is only one at present (a Honda), and it trade at a premium price. But we note that other countries have solved this problem by instigating tax incentives for converting gasoline to CNG/LNG cars
  • Another problem is more intractable though, the lack of infrastructure. It’s one thing to have an LNG tank installed in your car, another to fill it up when you’re running out in the middle of the wilderness, or wherever.

We might sound a little skeptical, or even cynical, but we don’t really mean it, it’s great that entrepreneurs take up a cause. We don’t have a problem that they might make a few bucks in the process, as long as that process is sound.

It is, sort off. Nothing wrong with wind energy, but the lack of infrastructure for cars to move on liquid or compressurized gas, we don’t know. Perhaps Boone can give the kick-start to building this infrastructure.

Almost anything is better than the present US energy policy, or lack of it. The incentives that are in place for alternative energy like solar and wind, have still not been renewed, causing great insecurity with firms that have expansion plans.

Boone is all for alternatives, which does raise one important question. As being a prominent oil man and a prominent conservative, why didn’t he try to convince his government. It seems unlikely he wouldn’t be able to get a hearing.

And Boone making money in the process? Well, he had this to say about that:

Pickens says while his hedge fund will earn money for its investors, earning more money personally is meaningless: “I’m 80 years old and have $4 billion. I don’t need any more money.”

It’s difficult to argue with that, so it looks like his plan just involves what he knows best, wind energy, natural gas (we already knew about that), energy in general..

One final note, apparently the interview took place in Sweetwater which, according to the journalist, is only known for hosting its famous Rattlesnake Roundup each spring, and now windfarms, the reason Boone showed it to the reporters. We know our classics, so we put the following question to you:

  • Which classical western movie displays the birth of Sweetwater?

Tags: Opinion · The Markets

6 responses so far ↓

  • 1 A solution for “stranded” gas // Aug 15, 2008 at 4:01 pm

    […] is also a fan. Not only does he hold 3M shares in InterOil, he also came up with a plan, the Boone Pickens energy plan, part of which is converting cars to running on natural gas (something which is relatively common […]

  • 2 Boone Pickens energy plan gains some traction // Aug 18, 2008 at 2:21 am

    […] We reported on the T Boone Pickens plan for energy before. He’s the legendary Texas oil man (who holds 3M shares in InterOil) and he’s so disgusted with US energy policy that he came up with his own plan, including a $58M budget to market it. It relies on alternatives (mostly wind energy) and natural gas. […]

  • 3 Top scientist slams Pickens plan for aggravating the natural gas crisis // Sep 9, 2008 at 4:33 pm

    […] in the T Boone Pickens energy plan to wane the US off (foreign) oil (we wrote about it earlier, here and here). However, he doesn’t like it’s dependency on natural gas, the US has already […]

  • 4 Natural gas has also corrected, but not in Asia — // Oct 15, 2008 at 5:53 am

    […] gas prices, notwithstanding Jim Cramer who called 2008 the year of natural gas, and notwithstanding T Boone Pickens, who has big plans for it, has also corrected quite sharply on the back of correcting oil. However, […]

  • 5 US natural gas glut? — // Oct 15, 2008 at 7:02 pm

    […] Boone Pickens plan. We’ve written about it before, it involves making much more use of domestic natural gas, especially in transport. For sure, there are opportunities there, and an additional advantage is that cars driven on natural (compressed) gas relief city air especially of dangerous particles (a Dutch study found that living close to a major highway is as dangerous as smoking, cutting life expectancy with a whopping 7 years, mainly due to small particles emitted by diesel engines). However, this will not happen anytime soon either (at least not on the scale to rev up gas demand in earnest. There is a whole lot of infrastructure needed before more consumers will switch to compressed gas as a fluel (apart from having to do non-trivial engineering on their cars) […]

  • 6 Some consequences of peak-oil — // May 25, 2009 at 8:53 pm

    […] it provides useful investment opportunities to revive demand ànd creating long-term benefits). Boone Pickens had a plan with natural gas, it even involves the transportation […]