I saw an interesting Tweet this morning from the Department of Energy that read: Sec Chu: “The President meant it when he said we need an all-of-the-above approach to energy.” This is of course referring to what Obama said in his last State of the Union address when he identified that America’s energy problems would be mitigated by establishing a diverse energy portfolio. Some perceived this as a response to the political upheaval over Keystone. What he made clear is that the U.S. needs a solution broader than a pipeline.

The President was trying to convey that America’s energy needs to come, not just from gas, coal, and oil, but from as many sources as possible. Correspondingly, the share of lesser used resources needs to be increased. Investment serves as a good analogy. A smart investor seeks to maximize his or her money and minimize risk with diversification strategy that focuses on short-term returns, long-term gains, and everything in between.  That way, should one company, or even a whole sector, go down, he or she has other investments to fall back on.

I believe America should follow this sort of thought process in its commercial pursuit of energy. As it becomes harder to access certain resources due to political, social, or environmental instability, we will need others to fall back on. The U.S. experienced this in 1973 when OPEC members moved to drive up oil prices for the U.S. for political reasons. We’ve seen periodic spikes since then, mostly surrounding turmoil in the Middle East, in 1979, 1991, 2008, and 2011.

Gas prices are going up again today. Before, there were few diversification options, but today we are developing the technology to move away from oil, such as electric cars and biofuels. But, we are not yet diversified enough: this oil price spike is harming consumers who rely on their cars. The use of alternatives needs to have a greater market impact for these innovations to be effective. We have made this mistake too many times: let’s hope that we’re finally learning our lesson.

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