April 10, 2006

BOOK: A Thousand Barrels a Second by Peter Tertzakian

  • When will we hit the energy break point for oil?

  • Are today's high oil and gas prices part of a routine business cycle, or are there more profound forces at play?

  • Is China's growing thirst for oil sustainable?

  • These and other pertinent questions are the focus of A Thousand Barrels a Second - an excellent read for anyone interested in learning some of the historical lessons of energy development over the past 300 years that can be applied to making investment decisions, managing risks, and finding business opportunities during the emergence of the new energy era.

    Written after the passage of the Energy Act of 2005 and the attempted purchase of Unocal by the Chinese CNOOC - but before President Bush's pronouncement of a national "addiction to oil" during his 2006 State of the Union Address - this book argues for the passage of proactive energy policies by governments and corporations alike while we still have relatively painless options.

    The author, Peter Tertzakian, is a knowledgeable guide for this exposition. His background - as a hands-on oil fieldworker, biophysicist, and as the Chief Energy Economist of a leading private equity firm focused on energy (ARC Financial Corporation) - gives special credibility to his writing.

    Peter never talks over the layman's head. Weaving stories with simply graphed data of the past and present, Tertzakian shows that the oil pressures we are experiencing are similar to the growth, dependency, break points, and rebalancing that always happens as new energy sources and demands develop. The question we need to address is - how long will it take before we enact the legislation and make the investments necessary to minimize the risks and impact of our increasingly expensive "oil addiction"?

    While I would have preferred less emphasis on history and more depth on energy diversity alternatives and policy options, it is a great resource for backfilling one's knowledge of the energy peaks and valleys that preceded the current ones. It is also interesting to see graphed timelines for several countries depicting how they customized their energy mix in response to their natural resources, political strengths, and institutional weaknesses. One glaring omission, IMHO, was an analysis of Brazil - whose farsighted policies in response to the 70's energy crises has enabled the country to develop arguably the most secure and diverse liquid fuel portfolio on the planet.

    Tertzakian does address ethanol and E85 but does not believe that agricultural feedstocks have "sufficient scale to offset near-term demand growth - let alone reversing gasoline demand - to avoid the next break point." Tell that to the Brazilians!

    In researching this book review, I ran across an amusing 5 minute recording of Peter Tertzakian being interviewed by Jon Stewart on The Daily Show.

    This video clip, and the book, are worth a look.


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