The Geopolitics of Industrial Hemp -A Duel with American Shale.
The international energy market has been going through a major transition over the past decade. The age of Saudi and OPEC domination is over and the culprits for the demise lie in the American heartland, not the Pentagon.
Over the past five years, the shale and natural gas industries experienced substantial technological advances. The most noteworthy breakthrough, by far, has been the ability to liquify natural gas for storage. Add to that new horizontal drilling techniques and an updated network of pipelines and you have a country on track to becoming a net energy exporter, for the first time since the 1950s. In addition to solving the Middle East conundrum that condemned the Bush folks to the 9th circle of Hell, these gains paint a very positive portrait for the future of the American shale market. Environmental concerns notwithstanding, and there are many, what could possibly upend this enviable market position? The challenger industry resides in Vermont and it has been gearing up for the showdown since 2013 - meet cannabis saliva L, also known as industrial hemp.
Cultivated for thousands of years, industrial hemp was among the most important commodity crops in the 18th and 19th centuries. Abundant and readily available this multipurpose fiber-based material was used in popular products ranging from fishing nets and rope to dynamite. For example, Boston Harbor - the Silicon Valley of the day - used it for sail-making and rigging lines.
The turn of the century saw an explosion of hemp farmers courtesy of the newly invented decorticator. This breakthrough had an impact and significance comparable to the cotton gin. Large-scale processing of the hemp fiber could now be accomplished using a fraction of the manpower. It solved one of the biggest problems farmers had faced for centuries.
Hemp cultivation was positioned to undercut influential industries such as paper, heating oil, and the newly emerging plastic sector. A hemp singularity was on the horizon and regulations soon followed. Prohibition measures and punitive restrictions on cultivation led to the eventual demise of the industry. Hemp returned for a brief encore during WWII, then quickly shelved again like a misbegotten scoundrel.
American hemp has re-emerged. It is currently being driven by food, CBD, and personal care products. As of 2016, they are valued at $129, $130, and $163 million, respectively.
The scoundrel is back and politicians are vying for his/her attention. Their aim is to position their state as the next Hemp Capital of North America. They are well aware that the title will bring long-term economic stability to their constituents and offset losses from other economic sectors.
To that end, they are willing to provide financial incentives to the tune of several million dollars like the processing facility currently under construction in Binghamton, NY.
As of May 2018, forty states are legally permitted to cultivate hemp under pilot programs.2
One of those states is Kentucky where former soldiers like Mike Lewis of Growing Warriors are returning to the land to cultivate the same crop their grandparents did. The industry is growing one harvest at a time.
What about Shale and natural gas?
Shale and natural gas have achieved global dominance by being cost-effective and less environmentally punitive than other fossil fuels such as coal. The former can be liquefied, stored, and extracted at a reasonable price and does not require a massive overhaul of the existing infrastructure. Industrial hemp can do the same - it can be grown quickly, processed locally, and stored and dried on-site. Plus, hemp replenishes the soil, allowing farmers to incorporate it into existing crop rotations.
An increase in the total acres will lead to a sharp drop in price. The lower cost and greater public awareness will allow hemp and hemp products to penetrate existing markets. This is already happening. CBD is only one of the several potential flagship products needed to fuel the engine of growth. The hemp markets of the 18th and 19th centuries should be viewed as proof of concept not relics of a different era.
When affordability and abundance are no longer an issue, the hemp market will penetrate massive segments of the American economy. No new technology is required to make this a reality. Natural gas and other fossil fuels are not popular with many consumers but, by and large, no viable alternatives exist. Cheap and plentiful hemp should be the answer. It would have massive geopolitical implications. A hemp-based energy sector will allow industrialized economies to be self-sufficient without compromising environmental standards. This will remake the American economy infusing stability, security, and sustainability on the most fundamental level. For a historically isolationist country, this achievement has many upsides - no more foreign wars to protect global supply chains, no more economic incentives for another Iraq.
While American shale is a formidable foe, a coming duel with industrial hemp may be the great David and Goliath story of this generation. Is Vermont positioned to take advantage of a once-in-a-lifetime opportunity? I hope so.