Me and Energy

You can hear me read this while watching my horses in the pasture here. It doesn't really sound like me. I think the microphone on my camera is bad.

Much as I would like to think it isn’t so, the cliché that the acorn doesn’t fall far from the tree is probably true. Like my dad, I started my career in energy as a petroleum engineer. He kicked off his career in Romania in the 1930s. Back then Romania was one of the world’s leading oil producers and one of its leading economies. Dad got his degree in petroleum engineering from the University of Bucharest and then took a job with Shell Oil in Ploesti, Romania. Fortunately, his job was considered essential to the Romanian war effort in World War Two because the battalion he would have joined fought the Russians in St. Petersburg and was decimated. My father liked to tell stories of the Allied bombers bombing the refineries where he worked. He and his girlfriend would hop on his motorcycle and ride off into the hills to watch the resulting fireworks. It wasn’t all good times though; they often got short notice of the impending air strikes and found themselves running for their lives.

He survived but the postwar peace in Romania was tense. Fortunately his family was well-connected in Romanian politics, and after the war his great uncle, Peter Groza, was appointed premier of Romania’s coalition government. Uncle Peter saw the writing on the wall—communist Russia would soon completely dominate Romania—and he managed to get my father a job in the Romanian legation in the U.S. Soon after my mom and dad arrived here, they defected, becoming political refugees. Out of work and foreign, Dad struggled to find a job. He wound up working again for Shell Oil developing oil fields in the jungles of Venezuela, leaving my mom in New York City pregnant with my brother. Eventually Dad returned to the U.S., where he attended graduate school and got a job. Many years later, I graduated from Duke University’s engineering school and took a job working for Shell in New Orleans as an oil-field engineer. Thus began my career in energy.

Since then I have worked in almost all aspects of the energy business, from oil production to energy trading to energy efficiency. I chose the energy industry because I thought my work would offer social value. And working for Shell was actually pretty fun. I lived in New Orleans, had an expense account and a lot of responsibility, and learned from one of the masters of the industry. I saw the oil industry in its heyday booming with the run-up in oil prices in the late seventies and early eighties. High oil prices meant more drilling and more business opportunities for companies like Halliburton that worked as subcontractors to companies like Shell and Exxon. With control of multimillion dollar budgets for oil platforms and gas plants, my Shell buddies and I would get wined and dined at New Orleans’ best restaurants by these companies eager for our business. It was rare when we paid for our own lunch and not so rare when one of us would go back to the office after lunch tipsy.

Much to my chagrin, after three years in New Orleans, I was transferred to Bakersfield, California. Back then, Bakersfield was an oil and agricultural town with not much else going on. I lasted there about five months before I quit my job to attend Harvard Business School. It was in Bakersfield that I first faced the griminess of the oil business. It was not at all like what I had seen in New Orleans where much of our work was in the Gulf of Mexico and Shell maintained a high level of safety and operations. In Bakersfield, Shell had just acquired an oil field from another company that hadn’t been run to nearly the same standards. There were horsehead oil pumpers and steam generators scattered everywhere in this desert environment at the southern end of the San Joaquin Valley where the Tule fog periodically descended, making everything look even worse. Oil was spilled on the ground, old equipment lay randomly on the side of the road, and the natural environment was depleted and barren.

I am sensitive about our environment. Almost my entire life I have owned and ridden horses. Whether I lived in the city or the suburbs, I have always had a reason on a nearly daily basis to escape from the concrete jungle into the countryside of America where my horses lived. This maintained a connection for me with nature and the environment that the typical American lifestyle has lost. Today over 90 percent of American life is lived indoors which means more buildings and less countryside. The places where I can ride are rapidly disappearing under the spread of suburbia that’s fueled by relatively cheap gasoline and big comfortable cars.

With a growing concern for energy’s impact on the environment, I moved my career focus away from energy production to energy efficiency where I have focused for the past seventeen years. That choice relegated me for a long while to “Birkenstock” status in the realm of liberal do-gooder hippies and left-wing Democrats. That characterization, which has changed, was unfortunate because the truth of the matter is that energy efficiency is the Occam’s razor of the global energy and environmental crisis that is sure to hit our planet as its population continues an upward spiral and developing countries accelerate their quest to match the standard of living in the U.S. and Europe. (Remember Occam’s razor is the principle that the simplest explanation is probably the best.)

The use of energy in our country has grown much more rapidly than the energy efficiency of the equipment which uses it. Had it been the reverse right now we could be enjoying our travel, big air-conditioned houses, super-malls, and mega-office buildings worry free. But our designs focused on size and style rather than efficiency. Look at the car industry. In the its early days, the big players used what was known as “the annual style change,” a modification in the look or style of the car to keep new competitors from getting a toehold in the business. Before introduction of the annual style change, starting a car manufacturing business was relatively easy and did not require a large amount of capital. However, the practice of annual style changes meant changing tools and dies before they were worn out. Expenditures on large-scale advertising were needed to alert consumers to the new designs each year. The established larger firms could spread the cost of these changes over more vehicles, thus lowering their unit costs. Dealer networks with specialized maintenance abilities and parts inventories had to be cultivated. Up until then parts had been standardized and interchangeable. By the early 1960s, the overall cost of annual style changes was estimated to be 25 percent of the cost of a new car. Unfortunately, annual style changes were just that. They didn’t include improvements to fuel efficiency, safety or environmental protection.

That’s just one example of how our technology to use energy hasn’t kept pace with how we use it. As a result, our consumption of energy has exceeded our capacity or will to produce it and our nation is gripped by volatile energy prices, environmental strife, and the associated political and economic ramifications. We assume every oil supply disruption and price shock is a fluke and that things will return eventually to normal. But the truth is that we don’t really know what normal is because we have never been in this position before. Instead of watching our oil supply swirl away like water draining out of a tub, why don’t we develop a strategy to use oil only for what we absolutely need it for and alternative fuels and efficient technologies for everything else? There is no way we have even come close to exploiting the range of energy efficient technologies and ingenuity that is possible. After all, this is America. We can do anything when we set our minds to it.

Energy efficiency doesn’t just save energy. Fossil fuels contribute to global warming, and climate change causes death, disease, floods, droughts, ecological harm, rising seas, intense storms, and increased heat waves. Using energy more efficiently also saves the environment. Maybe it’s time to set our hearts right on energy use and choose energy efficiency. It’s simply the best solution.