In the first part of this article, we discussed what I believe to be the increasingly precarious state of global energy supplies. With production in many of the world's major fields slowing, and with several of the OPEC nations subject to negative political surprises, mankind's ability to achieve a 40% increase in oil equivalent production by 2030 appears patently unreachable. The resulting world, potentially where energy demand progressively outstrips supply, could include both disruptions to our living standards and frequent international hostilities.

We're already seeing the first indications of an energy-induced crimp in our lifestyle. When many of the retailers reported flattish same-store sales in the December-January quarter, winter weather became the scapegoat.

But when that trend continued -- and even intensified -- in the next quarter, most economists grudgingly admitted that higher gasoline prices probably were at fault. And while we've witnessed a number of refinery outages, both planned and unplanned, it's important to keep in mind that -- other than production curtailments in Nigeria -- that wacky band known as OPEC generally has been relatively well behaved and hasn't really contributed to the recent run-up in gasoline prices.

Keep in mind that consumer spending comprises about two-thirds of our gross domestic product. So any lasting pullback in spending by consumers could have dire consequences for our nation's economy.

A way out?
Is there a solution to this dangerous state of affairs? I believe there is. For a while now I've been advocating nothing short of a comprehensive, Manhattan Project-style program to develop, promote, and even enforce ways to wean the world (or at least our part of it) from what has become an absurdly dangerous dependence on fossil fuels. I've now found support for that notion in the form of an article published in a 2005 issue of Joint Forces Quarterly, and written by Lt. Col. John M. Amidon of the U.S. Air Force, who was a student at the Air War College at the time.

Fools, of course, know what the original Manhattan Project was all about: In 1942, amid increasing concern that Germany was on the verge of developing an atomic bomb, top U.S. scientists were assembled under the direction of U.S. Army Gen. Leslie R. Groves, who had the express mandate to beat Germany to the nuclear punch. Within just three years, the project yielded the development and successful detonation of several uranium and plutonium bombs, two of which were directed at Japan.

In his article -- "America's strategic imperative: a 'Manhattan Project' for energy," Amidon first covers the territory included in part one of this article. That is, he discusses the producing horizons that already have seen their best days, including the U.S. lower 48 and the North Sea. And before detailing the various aspects of his proposed energy Manhattan Project, the colonel also describes several of the producing nations with at least the potential for production interruptions. In fact, he ominously includes OPEC leader Saudi Arabia, about which he writes, "Saudi Arabia remains the linchpin of U.S. energy security even though it is beset by political tension, internal dissent, and a looming demographic crisis." 

As he also says, "America faces a strategic imperative to decisively deploy a range of solutions, both interim and permanent, to address energy security." He believes that such an effort might consist of two phases: conservation and the energy power shift. And he warns that "trying to drill our way out of this crisis will not address the real problem, which is soaring demand and the danger of military conflict over shrinking resources."

What Amidon does propose for the first phase of his Manhattan Project is a series of strict conservation measures, including stronger Corporate Average Fuel Efficiency (CAFE) standards for automobiles. As luck would have it, and in what seems to be an excessively long-term effort, last week a Senate committee approved a bill to increase those standards from the current 27.5 miles-per-gallon requirement for automobiles to 35 mpg by 2020, and then by 4% more each year from 2020 to 2030.

Pass on the corn
Amidon's other conservation approaches include tax incentives to increase the prevalence of hybrid automobiles and an expansion in ethanol-based fuels. However, he advocates a movement away from corn-based ethanol to that made from other sources, such as switchgrass, a native plant that requires neither irrigation nor fertilizer, and therefore can be produced far more cheaply. 

His longer-term "Energy Power Shift" program would involve a movement to plug-in hybrid electric vehicles (PHEVs), which "use the same principle as today's hybrids, with the addition of a larger battery and a 120-volt electric wall plug." He maintains that "existing PHEVs average up to 180 mpg in typical commuter profiles."

The second aspect of his energy power shift program envisions improved biorefineries, which employ a "thermal conversion process (TCP), by which geological conditions that produce oil are recreated. A ... demonstration plant in Carthage, Missouri, is producing 500 barrels of oil a day using turkey manure, bones, paper products, wood, municipal waste, and sewage. The TCP produces usable oil at a cost of 40 cents per gallon using landfill waste as a feedstock." If Amidon's contentions about the TCP seem a little over the top, we might have felt the same way about atomic weaponry had we been around in the early 1940s.

Given the seriousness of our energy circumstances, it seems that the colonel's energy Manhattan Project prescription is lacking in one key consideration: the nature of its leadership and its mandate. Such an effort surely must be advocated in and led from Washington, D.C., where leadership on this crucial subject has been sorely wanting.

Further, it seems that the project, whatever prescriptions it ultimately adopts as appropriate, should involve top-level executives from the likes of ExxonMobil (NYSE:XOM) and maybe oilfield services leader Baker Hughes (NYSE:BHI), along with those from automobile manufacturers General Motors (NYSE:GM) and Ford (NYSE:F), and from such other leading industrial companies as perhaps Boeing (NYSE:BA) and General Electric (NYSE:GE). Still other likely candidates for inclusion would be economists, scientists, and engineers from our top universities and think tanks.

Foolish bottom line
Obviously at this stage, a proposal for a Manhattan Project for energy contains far more questions than answers. Indeed, seemingly the only certainty as we look ahead from our 2007 vantage point is that mankind stands to be the loser if a meaningful solution to this serious situation is not sought.  

All this, of course, is not to say that Fools should only wring their hands about energy in the short term. Indeed, I strongly urge that you include sound oil and gas investments in your investment portfolios. And looking to specific names, it seems to me that ExxonMobil and Schlumberger (NYSE:SLB) represent excellent proxies for the production and oilfield services sectors, respectively.

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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions. The Motley Fool has a disclosure policy.