ORLANDO. “As we speak, the Russian and Venezuelan navies are conducting joint exercises [off South America],” energy industry expert Michael J. Economides, Ph. D., told attendees here at the TMW Systems Transforum 2008 user conference. “Five decades after the Cuban Missile Crisis, for Russia to come back to the Western Hemisphere and thumb its nose at the U.S. shows how (much) our priorities have changed.”

Both an academic expert and a first-hand participant internationally in the energy industry, Economides is chair of XGas and Paleon Oil & Gas; a professor at the University of Houston’s Cullen College of Engineering, and editor-in-chief of Energy Tribune.

Boiled down, his thorough and vivid presentation, which touched on every geopolitical aspect of energy production worldwide—including oil, natural gas, coal, nuclear, solar and wind with side trips to Russia’s “re-Sovietization” under Putin and China’s Olympic thirst for diesel —amounted to a firm declaration that oil is king when it comes to powering transportation globally and will remain so for a long, long time to come.

“There is a continuous energy crisis of the 21st century,” Economides stated. “I am the guy who predicted $100 a barrel oil three years ago. And it did go below $100 but it won’t go far below $100.” However, he pointed out the price does not have to be that high. “Headlines rule. You can’t rationalize (the price). It should be selling for $60.

“One reason for this is many have lost control,” he stated. “OPEC likes $100 oil. Venezuela is a basket case—50 years behind the times. Nigeria is one of the most corrupt countries. Iraq has stabilized but we are paying Al-Qaeda's allies—the Sunnis. If we took all that oil (from Iraq), it would take 100 years to pay for the war. China has gone berserk—no country has ever increased their oil consumption by 20%. And Saudi Arabia has emerged as the world’s regulator.

“When in 1984 President Reagan put pressure on the Saudis, that brought prices down, Russia collapsed,” he continued. If they [Saudis] were to over-produce now, it would bring oil down to $70. And with oil at that price, Iran and Venezuela would be reduced from 800-lb gorillas to monkeys. The key is to push Saudi Arabia to increase and sustain oil production; that would enable history to repeat itself (removing Iran and Venezuela as menace states).”

Bringing the discussion back home, Economides said both presidential candidates are “hostages to their rhetoric” when it comes to reducing U.S. oil consumption. He said the simple truth is oil, natural gas and coal are primary energy sources—supplying 87% of the world’s energy demand. The rest is supplied by nuclear, hydroelectric, biomass (firewood, charcoal and, yes, cow dung), and wind and solar. He said that despite all the attention they receive, the latter two sources “will never amount to more than ½ of 1% of world energy.”

What is crucial to understand, according to Economides, is that by 2030 world energy demand will rise by 50%-- and will still be supplied 87% by oil, gas and coal. “The share for oil and gas may increase from 65% [now] to 66% by then,” he noted. “The contribution of oil and gas to meeting world energy demand will only increase.”

Economides did make a distinction between oil used to power transportation and that used to produce petrochemical-based products, including so many everyday plastic items. “No commercial power plant in the U.S. runs on oil anymore. The problem with seeking ‘energy independence,’” he stated, “is that the oil we use is chiefly for transportation. So you can’t address energy independence without addressing the transportation issue.”

The real kicker is you can’t address fuel for transportation to any significant degree without massively advancing technology, according to Economides. “Natural gas will be the next big energy source (for transportation); then will come hydrogen but not tomorrow! The bad news is there are no alternatives to hydrocarbon-based energy sources (for transportation) in the foreseeable future—not for decades. Oil and gas will remain the most efficient and easiest to handle energy sources.”

And Economides was very specific about what is clearly a pet peeve. “Ethanol is the biggest scam,” he flatly stated. “It takes 1.6 gallons of gasoline equivalent to produce 1 gallon ethanol. If we use all the corn we produce in the U.S. for ethanol, what will happen to food prices? If we use all the soybeans to produce biodiesel… yet the rhetoric continues.”

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