Lloyds of London warns its business clients to be prepared for $200/barrel oil by 2013.

Why? This video explains.

These folks are international oil experts. Watch the video again until you understand what they are saying.

The most important piece of information you need to understand is that the decline rate of aging oil fields is about 4 million barrels per day annually. This is due to aging oil fields. Every two years or so, we need to find the equivalent of a Saudi Arabia just to stay even with the natural decline rate. In order to keep up with demand, we need to make up for that and then also produce extra.

If one looks at a graph of HEI’s stock price over the last several years, one sees that after a slight lag, HEI’s stock price dropped like a rock in July 2008 when the oil price spiked.

The same thing will happen, but worse, when oil prices hit $200. Local HEI stockholders will face a loss of value of their stock while their electricity prices steadily rise. How is that being good to your stockholders?

It was my nightmare – where they send all the white-haired people away to go look for new land. The white-haired folks are the ones that depend on HEI stock for their retirement years.

There is a solution:

• First, say unequivocally that HECO will not put expensive biofuels into its Big Island generating units. We don’t have the luxury of time to play games.
• Second, commit to geothermal and get down to business figuring out how we are going to replace HECO’s oil-fired units. Don’t worry about community outreach, because we are taking care of that. And certainly do not send folks from O‘ahu to do what is our kuleana.

The higher the fraction of the base load we place in geothermal, the more we protect ourselves from volatile oil prices. We need to get serious about this. Now! We do not have the luxury of time.

When oil hits $200 per barrel, it will devastate our tourist industry and hurt American Savings Bank if we have not inoculated them from volatile oil prices.

We all know the benefits of geothermal; we don’t have to keep preaching about them.

We on the Big Island know that if we start to implement geothermal and work with the local people in an honest and respectful way, then we can have a discussion about shipping power to O‘ahu. But not before we take care of our business here first. If we do things in the right way, I am confident that we can ship geothermal power to O‘ahu.

HECO should have a Plan B, instead of betting everything on wind and the cable to Lana‘i and Moloka‘i. If we do this right, geothermal can be the stabilizing force that saves our economy. Price volatility prevents business from investing. Businesses need stability, and geothermal gives us that.

If HECO insists on putting expensive electricity-making solutions into its Big Island grid, it will be taking the wrong fork in the road and we don’t want to follow them there. I wrote about all the reasons we should go to geothermal after my second Peak Oil conference.  That was seven long months ago and time is ticking by.

If we move down the road toward geothermal, we will be moving toward stability and cheap energy.

I asked the folks at the University of Hawai‘i Economic Research Organization if it is fair to say that were we to get most of our base power from cheap geothermal, then we would be relatively more competitive to the rest of the world; and that our standard of living would rise, compared to the rest of the world. Carl Bonham, who is currently working on a formal analysis of $200/barrel oil, told me that it’s fair to say that.