America’s Next Economic Boom

Editor's Note: Oil at nearly $110, gasoline headed to $4 a gallon, gold pushing toward $1,000 an ounce, the dollar falling to record lows against other currencies, grain prices soaring to all-time highs on commodities markets, housing prices in a free-fall in some parts of the country and an economic recession appears at hand. (And this is not a rerun of the late 1970s-early 1980s.)

So what's next?

I'm glad you asked, as it already is time to begin thinking about the next American economic boom.

The "meltdown" and "crisis" headlines now so prevalent (it is an election year) can be entertaining, but in a sense they're already outdated by six-to-nine months.

After all, this, too, shall pass, whether slowdown, downturn, recession or stagflation, and then the inevitable economic recovery will begin. I'm often reminded, at a time like this, the Chinese word for "crisis" consists of two characters representing danger and opportunity.

If the economic danger is upon us, so then also is economic opportunity, the next great American economic boom: alternative energy and infrastructure.

Oilman Boone Pickens is on board. He's planning to build a $10 billion water main from North Texas to Dallas and parts south. He's also thinking about planting electricity-generating windmills along the right of way.

The Chief Investment Officer of CalPERS, the nation's largest pension fund, predicts total capital investment for alternative energy, telecommunications, electricity-generation, communications and infrastructure in the next two decades could approach $20 trillion. (CalPERS already has committed $2.5 billion to direct infrastructure and alternative energy investments.)

And this is only the beginning...

The current economic situation will resolve itself, as it always has in the past, although not altogether pleasantly for some in other parts of the country as Oklahomans remember well from the 1980s.

I'm looking forward to the next economic opportunity, as I hope you will as well.
--The Anecdotal Economist, March 1, 2008

Some regions already may be in a recession, even as we speak. Warren Buffett thinks so. He recently regained the distinction as the world’s wealthiest person at $62.5 billion net worth, recession or not, so many will be willing to defer to his judgment. In any event, we won’t be certain about a recession for months, perhaps well after the eventual, inevitable recovery already has begun.

But, as America teeters between economic slowdown and growth and $100-a-barrel oil is viewed less as an anomaly, 2008 may mark the beginning of a more serious national discussion concerning energy sources and uses. Although it will sound vaguely familiar to those old enough to remember a cardigan-clad President Carter who in early 1980 suggested we lower both our thermostats and our standard of living to accommodate his expectation of a bleaker energy future, this time the light at the end of the tunnel is not an oncoming train.

This discussion should seek to define the difference between energy security and energy independence, similar-sounding terms interchangeably - albeit incorrectly - used with resonating frequency during this presidential election year, and to determine, from a national policy standpoint, upon which outcome - security or independence - we will focus our considerable intellectual and investment capital in the years ahead.

For decades, but in particular since 2001 and despite a eight-fold rise in the price of crude oil since 1998, we have single-mindedly sought to preserve our energy security, a status quo of unlimited petroleum consumption, to the extent we now depend on imported oil to satisfy two-thirds of our annual demand, requiring on occasion, as necessary, the projection of both diplomatic finesse and military presence. Alternatively, energy independence would envision future national policies not mandating the current export of more than $1 billion a day to pay for our 10mm barrels-per-day (bpd) requirement of imported oil (of which half – $500 million a day – is remitted to OPEC and Persian Gulf nations) by funding and creating substantive alternative energy resources.

Understand we never fully will replace oil and natural gas as crucial components of our economy, our national security and our lifestyles, notwithstanding Richard Branson’s recent soybean-oil-powered 747 “biojet” flight. But if $100-a-barrel oil marks the end of the “cheap oil” era, it also may demark the beginning of a meaningful campaign to boost research and development of, and investment in – Manhattan-project-style – economically feasible and, most critically, nationally scalable energy alternatives.

Here’s the good part. Nationally scalable alternative energy means vast investment in new technology, infrastructure and consumer products. A concurrent, growing need for utility, transportation and telecommunication infrastructure improvement sets a stage for what will be the greatest economic boom in American history, as this commitment of intellectual and investment capital in transportation, energy and communications infrastructure (TECI) eventually reorders the nation’s economy, much the way petroleum and automobiles did a century ago.

Investment will be measured in trillions of dollars over the next several decades – say $20 trillion if you want a nice round number – and will generate millions of new jobs in the process. Investment capital will come from a variety of traditional sources, with a significant increase in public-private partnerships, as well as funding from international sovereign wealth funds which hold about $2.5 trillion at their disposal. Wall Street, now reeling from sub-prime malaise, will embrace this nascent boom like a homecoming veteran hugging his or her family. (OK, so that eventually may lead to another market “bubble,” but likely not for a long time.)

Better yet, we will supply the cleverness required to pull this off, as we have risen to challenges far greater than this on so many other occasions of vital national, and global, interest (World War II and landing a human on the moon immediately coming to mind).

A transition from oil/natural gas-fueled electricity generation (about 25%, mostly natural gas) to nuclear, clean coal, wind, solar, hydro and geothermal sources will take 30 years, if not longer, and would allow a better, priority-based allocation of critical hydrocarbon resources. Advances in natural gas, hybrid and battery-electric automobiles (now 40 miles between charges) and renewed commitments to our national rail system and local mass transportation would measurably decrease our dependence on imported oil over a generation. (Gasoline usage alone comprises 90 percent of imported oil – 9mm bpd of the 10mm bpd imported.)

Water resources and infrastructure development equally are critical (hence Boone Pickens interest) and advances in telecommunication, such as “virtual meetings,” may give rise to a new definition of work-at-home telecommuting. Many of these changes also work toward a decline in greenhouse gas emissions, the reduction of which seems to be universally agreed as a good thing, if only for health reasons, regardless of one’s opinion of long-term climate change.