The Pickens Plan Review

T. Boone Pickens is an oil man.  A very serious oil man who's made billions in the oil business.  But T. Boone knows that our current energy situation is "not something we can drill our way out of."

So what's he up to?

Over the last few months, Pickens has spent $58 million promoting what has become known as The Pickens Plan, a plan to harness the power of the wind to produce a substantial portion of the electricity needed to power our nation.

The Pickens Plan

Imagine a wind farm of 200,000 acres with thousands of wind turbines located in West Texas.  Well that's exactly what T. Boone is envisioning.  But T. Boone isn't just some visionary, he's a businessman and he's already invested $2 billion in his plan and prepared to spend $8 billion more.

According to Pickens, if we harness the wind in America's wind corridor that stretches from West Texas up to the Canadian border we could reduce our imports of foreign oil by one third.

Oil/Electricity?

The relationship between oil and electricity?  Almost none!  That's right, virtually no electricity is produced in this country by the use of oil.  But an awful lot of our electricity is powered by Natural Gas, a resource the US is abundant in and is very inexpensive.

What Pickens is promoting is replacing a substantial portion of natural gas used to power electric generating plants with electricity generated by the wind.

The natural gas freed up in this process would go to powering our motor vehicles.  If this sounds far-fetched, understand that Honda already manufactures a natural gas powered Civic.  So, if one wants to make the argument that Pickens is crazy, I'd argue that Honda does't think so.  In fact, there are over 7 million vehicles in the world that run on natural gas.  But only 140,000 are here in the US.

The Real Significance of the Plan

We can argue all day about the practicality of the plan, but the real significance is that finally someone is doing more than making speeches.  They're putting their money where their mouth is.  Only money can move markets.  All the speeches you hear won't make a dent in the price of a gallon of gasoline.  But when serious men make serious investments in alternatives the message to the market is clear; oil is going to be less important to us and therefore its value to investors declines.

A Contrast

About a year or so ago, President Bush was all excited about the prospect of producing ethanol from "switch-grass".  This is prairie grass that grows all over the plains of the US and unlike corn doesn't have to be cultivated and plays no part in our food chain.  This type of ethanol is known as cellulosic ethanol and can be produced 80% more efficiently than ethanol made from corn.  So, how much money has the federal government thrown at developing this exciting alternative biofuel?  Would you believe $150 million?  Yes, that's it!  And, in Washington $150 million is considered paperwork money.  This also sends a message to the markets.  This message is that this administration is just blowing sunshine up our ... uh, oh you know!

He's doing it for the money!

Well yes, and no.  If there was no money to be made by the likes of T. Boone Pickens there would be no worth to the project.  That's how economics work.  He's a very wealthy businessman, not an idiot.  But it can't be just the money.

T. Boone Pickens is 80 years old and has a net worth of about $4 billion.  If he simply puts his money in a money market account and scrimps to keep his expenses to under $1 million per day, he's good until he's at least 100!  It's clearly about more than just the money.  That's just a means of keeping score.

How seriously is he taken?

About 1 million Americans have visited his site, and have signed up to support and share his plan.  Earlier this week both of the presidential candidates jockeyed for photo opps with Pickens.  They're taking him very seriously.

My Viewpoint

I like this guy.  But don't take my word for it.  Visit his site and decide for yourself.  I recommend it.

 Rudi