I used to write about the oil business. It was a diversion from high tech I took for a couple years in the early 1980s. I worked in Saudi Arabia, attended OPEC meetings in Geneva and Vienna, and hung with a variety of characters from the era of what we called the energy crisis. This column is not about that crisis per se, but rather about how that crisis and our current energy situation are so different and yet so alike. Very interesting things are happening in the energy market — things that have taken 30+ years to come about. The future of energy isn’t what most people — even heads of state — think it is.

It’s better.

First understand that the original energy crisis of the 1970s was a sham — a political hiccup turned to advantage by a greedy oil industry. I have written about this before, but here again is the damning evidence courtesy of one of my oldest friends:

“During the summer of 1973 I worked on a tow boat on the Mississippi River. Every 10 to 14 days, we’d load our barges on the Gulf Coast and deliver petroleum products to some place in the Midwest. That was the summer of the big gasoline shortages. As we would travel up and down the Mississippi, we’d pass an Exxon tow. It would have eight barges (a double unit) fully loaded, or about 10 million gallons of gasoline. The tow wouldn’t be moving, it would be tied up in a quiet spot on the river. Each trip we find more tows tied up. Shell, Texaco, Exxon, Amoco were all doing it. One day they announced in the news how much gasoline would be used in the USA in a single day. I made some quick calculations and realized we had passed a month’s supply on our last trip.”

In 1973 U. S. oil prices, thanks to price fixing by the Texas Railroad Commission, were already the highest in the world at $5.50 per barrel for West Texas Intermediate — the global standard. World oil prices were around $2 per barrel and going down. Until the OPEC embargo, that is, when, with the assistance of the big oil companies as described above, an oil crisis was created from nothing. World prices went from $2 to a peak of $43, sending every drilling rig in the world back to work and over time doubling U. S. oil production to almost 11 million barrels per day until demand crashed and the price of oil dropped back to a low of $8. That was still higher than $5.50, but recovery to an inflation-adjusted version of that peak $43 price took 25 years.

That’s the way it is with supply and demand when demand is relatively inflexible and new supplies are slow to come on-line. But inevitably they do come online, sending prices crashing back until new supplies are finally depleted and the cycle starts all over again, which is what we are seeing now.

Only all of this has to do strictly with oil and gas, not renewable energy sources, because those are even slower to come online. Most of the current crop of renewable energy sources, for example, were well known in the 1970s, too. Back then they were just inconsequential because their contribution was so small.

That was then, this is now. My work on this past summer’s Startup Tour introduced me to a number of energy startups with technologies that will actually make a difference in this age-old pattern of supply and demand. Because for the first time the supplies that are being created are renewable — they generally won’t be depleted. There is no new well involved to come online then peak and then die. There is just slow and steady energy production growth for 25 years or so from the same facility to which is added over time another and another and another machine.

We have one solar startup that is moving slowly and inexorably toward a target of making electricity from sunlight for $0.50 per watt. They are about three years from reaching their goal, at which point they will bring online a manufacturing capacity greater than the world has ever seen — all without spending a cent to develop that capacity (cue spooky music).

Electricity from coal usually costs $2.00 per watt to produce, so $0.50 per watt is amazing. What if this is hype and they are off by a factor of 10? Electricity at $5.00 per watt is still competitive with everything except coal and hydro. It’s still amazing.

Now imagine a smart electric grid that works differently than the one Al Gore talks about. Gore’s grid is smart, too, but this one is smart and superconducting. The power lines have virtually no electrical resistance, meaning the average transmission line loss of 35 percent drops to maybe five percent, making U. S. energy production effectively 30 percent greater without building any new power plants. Not only that: a superconducting grid can carry lots more power, making it every more possible to trade power between regions, working around regions of local control and high supply prices (remember Enron?), thanks to another of our startup companies that I’ll be covering in text and video in the next few weeks.

This is something like Moore’s Law hits the oil patch. Or maybe it should be called Ford’s Law, because this is really an effect of mass production against an effectively undepletable supply of raw materials.

Any argument about Peak Oil should include a discussion of Peak Demand, because that’s where we were two years ago. Energy demand in the U. S. is going down, not up, and all these renewable sources are coming into volume use against that falling demand. That would usually mean these new sources would give way to King Coal as they did in the 1970s, except for that $0.50 (or $5.00) per watt.

That low price per watt scares the crap out of BP and will change the geopolitical balance in the world within a decade, making the Middle East maybe a little less important.