Dispatch from ISM: T. Boone Pickens on the Energy Market and the Future of Natural Gas and Fracking

Over lunch at the ISM conference, T. Boone Pickens, who is 85 years old but sharper than most people half his age with his wicked sense of free market humor, talked about the state of the energy market and shared his thoughts on the future of natural gas use and fracking.

Here are some of the highlights from the start of his talk on framing the opportunity for natural gas:

  • OPEC has “social commitments” which require its member countries to keep the price of oil above $100 per barrel (Iran wants it over $120 per barrel).
  • Half of imports (half of oil in the US) comes from OPEC – it goes to the East Coast and Gulf Coast.
  • The price it comes in at is the OPEC price.
  • This price has influence on oil produced in the US (west Texas intermediate —WTI).
  • The Brent North Seas price is the OPEC price.
  • The WTI price and Brent price are about $10 apart – WTI is 10 percent cheaper than Brent.
  • Natural gas has a larger arbitrage. In the US it is 75 percent cheaper than it is in Europe and Asia.
  • 70 percent of oil ends up in transportation fuels (and diesel prices are rising higher than inflation).
  • Natural gas is 30 percent cleaner than diesel.

And here are some of T. Boone Pickens’ one-liners:

  • Obama “thinks the DOE invented fracking” – horizontal holes, essentially – but Halliburton did it over 30 years before Obama believes the Department of Energy pursued it. The longest fracking hole is 27,000 feet (in Russia).
  • Almost as funny as PJ O’Rourke: “Russia has the longest horizontal well, oil production, vodka, and caviar. Then you run out of their list of resources fast.”
  • A libertarian at heart: “Do not have government build infrastructure. Do not have government build everything.”
  • We are the only country in the world with “freehold minerals.” This means that mineral rights goes with the surface in America. In contrast, “take Poland or most parts of Canada,” both countries in which the mineral rights are owned by the government/province.

Stay tuned for more to come from ISM. 

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