Trouble Coming to OKC?

[MikeOKC]

But even through the worst recession in decades, oil prices have gone way up and pretty much stayed there. They might come down some but as I mentioned before, there will always be a strong demand for domestic oil & gas.

Our energy base sometimes keeps me awake at night. The fact is that the world is desperately working to find alternatives to energy that doesn't require killing ourselves by the burning of fossil fuels. Not everyone is as enthusiastic about the energy industry as some like Jim Cramer on CNBC (who I think would shine Aubrey McClendon's shoes every morning if asked). The simple fact is that Oklahoma City is one discovery away from disaster and implosion without diversification, and that only dribbles our way. We've hooked our wagon to a dying industry. It's not a matter of 'if' but 'when.' People around here don't like to hear talk like this for obvious reasons, but the truth is staring at us in the face and we continue to move ahead as if oil & gas has anything but a short-term future. I hate to sound pessimistic, but what I'm writing isn't wild fancy - read Ray Kurzweil and others who fully expect an alternative energy that will develop almost overnight and will leave the burning of fossil fuels to the history books. Where does that leave Oklahoma City?

[ljbab728]

Our energy base sometimes keeps me awake at night. The fact is that the world is desperately working to find alternatives to energy that doesn't require killing ourselves by the burning of fossil fuels. Not everyone is as enthusiastic about the energy industry as some like Jim Cramer on CNBC (who I think would shine Aubrey McClendon's shoes every morning if asked). The simple fact is that Oklahoma City is one discovery away from disaster and implosion without diversification, and that only dribbles our way. We've hooked our wagon to a dying industry. It's not a matter of 'if' but 'when.' People around here don't like to hear talk like this for obvious reasons, but the truth is staring at us in the face and we continue to move ahead as if oil & gas has anything but a short-term future. I hate to sound pessimistic, but what I'm writing isn't wild fancy - read Ray Kurzweil and others who fully expect an alternative energy that will develop almost overnight and will leave the burning of fossil fuels to the history books. Where does that leave Oklahoma City?

Mike, at some point you will be correct about fossil fuels, but that is hardly imminent. It will likely be decades, if not centuries before that occurs.
Of course OKC could use more diversity in it's economy and I think we're working in that direction and I sleep very well at night without worrying about it,.

[MikeOKC]

Mike, at some point you will be correct about fossil fuels, but that is hardly imminent. It will likely be decades, if not centuries before that occurs.
Of course OKC could use more diversity in it's economy and I think we're working in that direction and I sleep very well at night without worrying about it,.

Centuries? Read some good books on the exponential growth of technology and how that is leading towards singularity. And I mean 'exponential' in its correct definition and not as it's tossed around as meaning only 'huge.' In the opinion of people that I respect very much in my industry, the technological growth will lead to a harnessed energy source that will render fossil fuels obsolete within 20 years. Think of the Internet - what were your thoughts on that in 1991? The Internet has almost put newspapers out of business, bookstores, it's changed the way we transact business (it's turned your travel business upside down), changed the way we communicate, on and on and did anyone dare believe all of this change in just 20 years? The next great technological 'leap' will send us into energy sources only dreamt of today.

[Larry OKC]

While the time frame can certainly be debated, change is inevitable. Those that are able to adapt to it survive, those that don't will vanish. Reminded of cell phones. As the phone companies saw the emerging technology and businesses expand, taking a bigger share of the market, the smart ones bought that technology/companies and adapted to it. I see the same things happening with energy.

[MikeOKC]

While the time frame can certainly be debated, change is inevitable. Those that are able to adapt to it survive, those that don't will vanish. Reminded of cell phones. As the phone companies saw the emerging technology and businesses expand, taking a bigger share of the market, the smart ones bought that technology/companies and adapted to it. I see the same things happening with energy.

I don't. The reason I don't see it happening the same way is that telecommunications morphed easily into the new world because they were technology companies. Old energy is a fossil fuels industry that actually uses technology only as an end-user. The next energy source will come courtesy of computers; technology companies will be leading the way. In other words, don't be surprised if your grandchildren receive their "energy" bills (with almost no infrastructure required) from Apple and Google and Samsung or....you get the idea. Singularity will change everything. Even pre-singularity technology will vault us past the burning of fossil fuels. The Internet? That's nothing compared to what technology will be bringing us in the way of health care, energy, national security - the list goes on. It's all hard to fathom - but it's coming.

[ljbab728]

Centuries? Read some good books on the exponential growth of technology and how that is leading towards singularity. And I mean 'exponential' in its correct definition and not as it's tossed around as meaning only 'huge.' In the opinion of people that I respect very much in my industry, the technological growth will lead to a harnessed energy source that will render fossil fuels obsolete within 20 years. Think of the Internet - what were your thoughts on that in 1991? The Internet has almost put newspapers out of business, bookstores, it's changed the way we transact business (it's turned your travel business upside down), changed the way we communicate, on and on and did anyone dare believe all of this change in just 20 years? The next great technological 'leap' will send us into energy sources only dreamt of today.

Mike, we can agree to disagree then. Get back to me in 20 years and we'll discuss who was right. I remember similar discussions about imminent changes in the way we live back in the 60's and 70's that basically never happened.

[MikeOKC]

Mike, we can agree to disagree then. Get back to me in 20 years and we'll discuss who was right. I remember similar discussions about imminent changes in the way we live back in the 60's and 70's that basically never happened.

Fair enough. I remember the 60's and 70's as well, many of the things never came about because the technology for the dreams weren't there. Today, with AI, nanotechnology and raw processing power, so many things are about to change. And don't forget, many things from the 60's did progress in unbelievable ways. The computers that took us to the moon? There is actually more processing power in smartphones today. I think the thing to look at is the last 20 years. That's a better gauge as to where we're going. You seem so skeptical, I would urge you to read Ray Kurzweil or watch 'Transcendent Man.'

To bring this all back around - my point is that Oklahoma City needs to concern itself with all of our eggs being in the same basket as fossil fuels. If the 'next big thing' were to happen next month CHK and the like would be in no position to buy their way into the future. The wealth of CHK, for example, is still in the ground with only promises and hopes - that still rely on the burning of fossil fuels. Yet, we've handed over a huge neighborhood to this dying industry.

If nothing else, I would hope our little discussion here might encourage some to really think about this and consider Oklahoma City's future under conditions I have outlined. It's not a ridiculous notion or even a fanciful one - it's a probable one.

[Questor]

The thing about innovation is that no one can time it... one breakthrough and the world could change tomorrow.

Back to the economy. What is going on in the markets right now I find really troubling for everyone, this time including OKC. Throughout the recession energy and government-sector jobs and contractors have been doing really well, which we have an abundance of both here. What happens now I'm not so sure. In the coming years the government cuts are bound to effect our very large defense contractor presence. With energy, prices tend to fluctuate but the thing that concerns me some about that industry is that they tend to heavily re-invest their money in and play the market. There have been some years and some companies that, if you read through their company financial data carefully, their profits were mostly coming from investments and not so much their actual core competency. I haven't been following them that closely lately, I would assume they are holding a lot more cash now, but some of the players in that industry do tend to take on a lot of risk. It just seems to me like that could also be a problem for OKC in the coming years.

[bluedogok]

I think it is highly unlikely there is going to be "one magic bullet" that kills fossil fuels, I think it will take a much more balanced approach and there will be many different types of alternative fuels needed to replace oil. I don't think we will see the entire world move away from fossil fuels in my lifetime, there may be some advancements which reduce the public need for those fuels but oil is used in so much more than people think. Then you also have the developing and expanding countries of the world whose usage is growing exponentially. There will always be some need in oil, gas and coal, probably not as great of a demand as there is now or will be in the bear future but there will always be a demand. "Peak oil" is just the current buzzword for the same doom and gloom forecasts that have existed for many, many years. Reminiscent of the "ecology movement" in the early 70's during the oil crisis at that time. What's new is old again, rinse, repeat.

[ljbab728]

I think it is highly unlikely there is going to be "one magic bullet" that kills fossil fuels, I think it will take a much more balanced approach and there will be many different types of alternative fuels needed to replace oil. I don't think we will see the entire world move away from fossil fuels in my lifetime, there may be some advancements which reduce the public need for those fuels but oil is used in so much more than people think. Then you also have the developing and expanding countries of the world whose usage is growing exponentially. There will always be some need in oil, gas and coal, probably not as great of a demand as there is now or will be in the bear future but there will always be a demand. "Peak oil" is just the current buzzword for the same doom and gloom forecasts that have existed for many, many years. Reminiscent of the "ecology movement" in the early 70's during the oil crisis at that time. What's new is old again, rinse, repeat.

I totally agree, bluedog. That was the point I was trying to make earlier.

[icemncmth]

The fossil fuel discussion has been going on a very long time. Currently there isn't anything even on the horizon that has the same btu's as gasoline.

Electric cars are a joke because in the US where does most of the electricity come from? Fossil fuels!! Not to mention the electrical grid in the US couldn't handle the extra lode.

Oklahoma is a fossil fuel dependent economy and has been for a long time. Just remember the 80's and what the collapse did!

I know the big companies are more diverse today but it still will hurt if there is a double dip.

One question is how in debt is CPK?

[Questor]

Totally agree there is most likely no single silver bullet for energy. Can't say for sure as this is basically conjecture. But if the question was is there a technology out there that could harm Oklahoma's energy sector, the bottom line is you don't need a game-changing silver bullet to do that. More modest technologies, if proven viable, could have a negative impact on more traditional stock prices. It is a bit alarming that Pickens is about the only Oklahoma energyman that we ever hear talk of next generation technologies from.

Interesting question about CHK. I think the more interesting question though is why did Sandridge's stock price fall 42% in the last few days?

CHK: From their 2010 Balance Sheet total liabilities of $21.9 million (a combination of short and long term debt), and from their Income Statement $1.663 million in net income to common shares. Gross profit was $6.8 million. Like anything in the financial world though that doesn't tell the full picture and you would need to look at lots of other things to make any determination there.

[Larry OKC]

WOW, hadn't heard that...thought I read recently that SandRidge stock or something had very recently gotten a big boost?

[okcpulse]

Fair enough. I remember the 60's and 70's as well, many of the things never came about because the technology for the dreams weren't there. Today, with AI, nanotechnology and raw processing power, so many things are about to change. And don't forget, many things from the 60's did progress in unbelievable ways. The computers that took us to the moon? There is actually more processing power in smartphones today. I think the thing to look at is the last 20 years. That's a better gauge as to where we're going. You seem so skeptical, I would urge you to read Ray Kurzweil or watch 'Transcendent Man.'

To bring this all back around - my point is that Oklahoma City needs to concern itself with all of our eggs being in the same basket as fossil fuels. If the 'next big thing' were to happen next month CHK and the like would be in no position to buy their way into the future. The wealth of CHK, for example, is still in the ground with only promises and hopes - that still rely on the burning of fossil fuels. Yet, we've handed over a huge neighborhood to this dying industry.

If nothing else, I would hope our little discussion here might encourage some to really think about this and consider Oklahoma City's future under conditions I have outlined. It's not a ridiculous notion or even a fanciful one - it's a probable one.

MikeOKC, tell me exactly how oil and gas is a dying industry when its one of the only growth industries in this country? Do you not forget that CHK is natural gas, not oil? Devon is both oil and gas, as is Sandridge. Continental Resources is oil. It's a fallacy to conclude that we all ALL of our eggs in one basket with oil and gas when we have major employers that outnumber the oil and gas companies based in OKC. We forget about the $6.7 billion biotech industry just NE of downtown, Boeing, American Fidelity, Hertz, Tinker AFB's OKC Air Logistics Center, FAA, MidFirst Bank. Oil and gas companies are the tallest nail because it is a very profitable industry with high paying jobs. An industry that is hiring because they are devoting their resources to domestic energy. How is that a dying industry?

Your concern about CHK's habits go without realizing that Sarbanes Oxley regulates and audits the crap out of company business practices. Enron and the oil bust of 1982 were all pre-SOX business practices. Now we have audits on audits, and if screw ups are consistent, the government fines these companies big money. So either CHK has financial resources outside of our knowledge for all of this expansion, or the media still can't get past McClendon's large salary he received a couple of years ago.

There are large reserves in America we can't tap because of environmentalists. So again, elaborate on this 'dying industry', that would not only affect Oklahoma City, but Tulsa, Denver, Calgary, Midland-Odessa, Edmonton, Kamloops, Wyoming. Not to mention Houston would be doubly screwed.