Human behaviors are often consistent across many different fields of interest but are wrapped in different buzz language.
The stock market, as an example, is a indicator of future expectations.
It does not tell us what the stocks have done in the past.
It tells us what investors expect in the future.
And it reflects the Net Present Value of those investments—in other words, investors know that a dollar today is worth more than a dollar tomorrow. So regardless of what earnings are expected to be in any short time frame, the market values them by the discounted future earnings looking further into the future.
Well, there is a pseudo geo-political stock market in which all countries and non-state actors (such as terrorist groups and individuals) look out at the political landscape and assess the discounted net present value (or strength) of the various international players, such as the United States, China, Iran, Russia, Israel, and others.
Currently, players in-the-know don’t see the world relieving itself of its dependence on oil anywhere in the short-term or mid-term.
As such, the “stock†of the oil-exporting regions (like Arab world, Russia, and Venezuela) are higher than they would otherwise be.
The moment the world saw that the United States had a clear and determinate path to oil independence, is the day that “stock†in the USA would rise dramatically.
In the short-run, there is only one way to do this.
The Open Fuel Standard Act—which requires that all autos be able to run on any mix of gasoline or alcohol fuels would shift the geopolitical landscape the day it were enacted—not when the oil independence were to occur. The only mandate is the $150/vehicle cost. The free-marketplace would handle the rest of the supply-side solutions.
Analysts would see a near-term rise of vast substitutes for petroleum, in which every nation in the world would be in the energy producing business—not just those that sit atop oil reserves in excess of their internal needs.
It doesn’t matter that it may take 5 to 8 years to make a major dent in oil demand. Because it will be seen as the most credible and likely path to make that dent, it has the biggest short-term immediate effect on the value of US Political “stockâ€â€”at a time when we are in real need of more political capital.
While electric vehicles may be a longer-term solution, it will take a long time to for sufficient market penetration to even begin to dent oil consumption.
Nuclear energy, solar, wind are not substitutes for oil since we don’t use petroleum to make electricity today (about 2% of US electricity is generated from oil).
So a prudent geo-political investor would ‘invest’ in the Open-fuel Standard Act. At $150/vehicle, it is an unprecedented return on investment opportunity!
Peter Forman
MoveBeyondOil, Chairman