| On Empty and (Almost) Out of Time |
By Bill Roth
August 18, 2008
How entrepreneurs can spearhead the green economic revolution.
I interrupt my series of articles on "Green Entrepreneurship" to talk
about what's going on at our gasoline pumps and meters. The bottom line is
this: don't be fooled by lower gasoline prices, and know that the price of
energy will continue to rise in the long run. So dust off your old
assumptions about financial paybacks and immediately begin investing in
technologies that reduce energy consumption.
Let's start with oil. I just published a book called On Empty (Out of
Time). Chapter 4 explains how gasoline prices are impacted by the global
supply and demand for oil. Here's why our pump prices are going down today:
About two weeks before the price of oil started to fall, China raised
the subsidized prices it charges at the pump for gasoline and diesel,
and took millions of cars off the roads to reduce air pollution in
Beijing during the Olympics. Both actions resulted in reduced oil demand by China.
Americans have reduced their driving by approximately 5 percent and are
shifting their preference toward higher-mileage vehicles in response to
$4-per-gallon gasoline prices.
The American dollar (which is the currency used in oil contracts) is
strengthening against the Euro because Europe (and Japan) are facing
recessionary economic declines. This means we get more oil per dollar as
traders stop hedging against the decline in the United States' dollar by
buying commodities such as oil.
So the next questions are: a) how low will prices fall and b) how long
will they stay down? In the short-term, the price of oil and our pump
prices could see further price reductions for two reasons:
Globally, many nations are getting dangerously close to a recession,
which means the demand for goods and services, including oil, will decline.
A global green economic revolution has started that will produce new
technologies that will be cheaper and cleaner than using oil. That will
reduce demand and, therefore, prices.
How low could our pump prices fall? It's possible we'll see $3-per-gallon
gasoline again. Hopefully we won't. I say that because if we do see
$3-per-gallon gas prices in the coming months, it will probably mean the
U.S. is in a recession.
In Chapter 11 of On Empty (Out of Time), I talk about China and India. The
reason why oil prices will rise over the long-term is as obvious as what
you're seeing in the broadcasts of the Olympics being held in Beijing, China.
What the Olympic broadcasts are showing is that China has succeeded in
building a middle class equal in size to the entire population of the U.S.
At the same time, approximately 900 million Chinese (three times the
population of the U.S.) are still aspiring to gain middle-class status.
In India, 400 million people (100 million more people than the entire
population of the U.S.) do not have electricity service, but they're
working very hard to get it.
So, in these two countries alone, we have populations four times the size
of the U.S. seeking a comparable level of prosperity and well-being. This
is the underlying factor in the world oil market that's going to drive up oil prices.
What is the answer? I'm not making a political statement when I assure you
that a massive offshore oil-drilling effort by the U.S. will not reduce
prices at the pump. It might slow the rate of price increase but it won't
bring prices down. Here are the core numbers:
Annual U.S. oil demand:
7.5 billion barrels
Current estimate of offshore oil supply potential:
11-plus billion barrels
Expect higher prices for electricity, too. The problem here is the high
price of building new electrical plants. Nuclear plants are even more
prohibitive, and wind won't work because this country doesn't have
transmission lines where wind power is available. Coal plants aren't
viable, either, because they require expensive technology to cut down on
So, until solar prices become competitive, price increases at the meter
will rival those at the pump.
Here's the near-term solution: Use less energy. For example, in On Empty
(Out of Time), I list in order of magnitude the major end-use energy
applications in your home or building. And I list what you can buy today
to lower consumption. Here are several options to consider:
Lighting accounts for 22 percent of a building's energy consumption. If
you buy compact fluorescent (twisty) light bulbs rather than
incandescent (pear-shaped) light bulbs, you'll reduce your annual energy
consumption for lighting by approximately 75 percent.
Invest in ground-source heat pumps. Heating and cooling in a building
account for more than 40 percent of total energy consumption. An
energy-efficient ground-source heat pump uses the earth's natural
temperature below the frost line to supplement cooling and heating
Buy higher-mileage and/or alternative-fueled vehicles. Drive a hybrid.
If you do a lot of city driving, they'll give you 40-plus miles per
gallon. If you're driving 15,000 miles per year with a vehicle that gets
15 miles per gallon of $4.50 gas, then you can save $1,500 the first
year you use a hybrid. Presuming there's a 10 percent per year
escalation in gasoline prices, you're saving $9,100 during the first
five years of driving a 45-mile-per-gallon hybrid.
The above examples are just a start. What I anticipate is a prosperous
future based on emerging green technologies that offer lower pump/meter
prices, reduced dependence on foreign oil and global warming solutions.
These technologies are now in first-generation manufacturing.
Here's the great news: most of these technologies are based on American
engineering, developed by American entrepreneurs and financed by our
venture capitalists. We stand on the threshold of an entrepreneurial
opportunity comparable to the Industrial Revolution, the information age
Entrepreneurs, this is your moment in time. Take action now to capture
cost savings through energy conservation and begin to explore technologies
that offer you new paths for growing your business. America and the world
are counting on you to move us into a global green economic revolution.
Bill Roth is president of NCCT, a San Francisco-based consulting firm
facilitating innovations in sustainability marketing and green business
strategies. In addition to participating in the launch of the first
hydrogen-fueled Prius, he has held executive leadership positions as
senior vice president of marketing and sales with PG&E Energy Services, as
COO of Texaco Ovonics Hydrogen Solutions and president of Cleantech
America, a developer of solar power plants. Roth’s latest book, On Empty
(Out of Time) details an emerging multi-trillion dollar green economy that
is revolutionizing how the world does business, and how you can make money from it.