Energy Politics

I wanted to add an addendum to yesterday’s post. It seems there’s more news concerning high fuel prices’ effects on driving.  A  study  by the University of Alabama and Harvard Medical School shows a decline in fatal traffic accidents of 2.3% was found for every 10% increase in gas prices.

Just for teenagers, a 10% increase in prices drops fatalities by 6%. Teens seem more likely to drive dangerously due to either inexperience or just raging hormones, which suddenly seems to dry up when driving is cutting into a larger portion of one’s budget.

The articles adds, “There is also clear evidence that Americans drive bigger cars when the price of gasoline is low, and smaller cars when the price goes up; a statistic that is not surprising at all considering the current brisk sales of hybrids and small, fuel-efficient cars.”

Which means that not only are people driving safer, they’re also driving safer vehicles. If you’re in a car, you’re much more likely to survive a collision if you crash into another car as opposed to being smashed by a monster-sized SUV.  With less people being able to afford vehicles that only get 10 mpg, we’ll see less fatalities even if the number of accidents remains consistent simply because the vehicles involved in collisions will be smaller and not able to create as much damage.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

As you grumble to yourself while filling up your tank, at least take this to heart: driving fatalities have dropped since oil prices have increased.

There was a 9% decrease nationwide in traffic deaths from January through May compared to the same period last year. This includes an 18% drop in deaths in March 2008 compared to March 2007. At least 31 states have had a decrease in deaths during the first half of the year of at least 10%, with some claiming to have seen a drop of 20%. Only a handful of states have actually increased their driving deaths compared to the same time last year.

Now of course, the state governments want you to think it’s a fallacy to believe that less speeding, aggressive driving and overall time on the road is the cause of less deaths. No, the government is to thank for this, with police officers pursuing more speeders and drunk drivers, teen-licensing programs and safer vehicles.

I’m sorry guys, but THAT’s the fallacy. People don’t break driving laws out of ignorance. No sane person actually believes it’s perfectly okay to cut people off, drive drunk, ram another vehicle or drive 20mph over the posted speed limit. People do those things because they think they won’t get caught, or they don’t care how their actions may affect other people. Human behavior dictates that there’s always extenuating circumstances to skirt the rules, usually when it benefits the person justifying this behavior.

Which means when gas is cheap and plentiful, people are less likely to be concerned about how their driving habits are affecting their fuel economy, let alone the safety of their fellow drivers. But when they have to pay $4 a gallon, suddenly every drop of gasoline is sacred.  You’re less likely to get sideswiped by some idiot running a red light at supersonic speeds when fuel prices are high, because less people can afford to be burning up all that gas.

I would love to believe that people are driving safer out of the kindness of their heart, but I know better. As sad as it is to admit it, just as selfishness causes accidents to happen when people drive carelessly, selfishness about paying for fuel is likewise keeping people safer when they can’t afford to be racing to every red light.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

With a hatred usually reserved only for the boogeyman or Lindsay Lohan movies, the U.S. Senate has set its sights on energy traders accused of driving up oil prices with a new bill aimed at cracking down on excessive oil speculation.

The bill is being championed by Senate Democrats to try to get record oil prices under control. However, they face opposition from Senate Republicans, who argue that the bill should also open up offshore oil production currently banned by federal law. They argue that by just focusing on speculators, the bill will fail to fix the supply and demand problems that are also affecting oil prices. The Democrats counter that E&Ps already have access to enough federal lands to accomodate production needs.

However, if you’re looking for radical changes in any kind of policy, you might as well keep looking. Democrats only hold a slight majority in the Senate, which means both parties have enough voting power to halt any policies brought up by the other side. And since Democrats and Republicans seem to have fundamentally different views on what is causing high oil prices, we’re unlikely to see any definitive laws be enacted unless they’re severely watered down to the point that they do nothing.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

It’s funny how little it takes people to compromise their values just to have a quick fix solution. Hugo Chavez, the lovable dictator from Venezuela, has decided to grant the citizens of New Hampshire some free heating oil to help them out this winter.

Two years ago, New Hampshirites turned down Chavez flatly. However, skyrocketing fuel costs have concerned residents and now they’re willing to throw in their hat with the pudgy socialist.

Back in 2006, New Hampshire Senator John Sununu called the offer it a “disgrace” and an attempt at grandstanding by Chavez. However, other New England states have embraced the offer, with New Hampshire remaining the last holdout in the upper Northeast. Today’s agreement brings an end to that. Even Sununu, who is still a critic of Chavez, said he is in favor of programs such as the one Chavez offers.

You know, we Americans are a fickle bunch. We thrive on stories about the American Way Of Life, the American Dream, freedoms to prosper and the such. But at the first sign of trouble, the first pinprick that bursts the protective bubbles we’ve made for ourselves, we become willing to throw in our lot with snake oil salesmen like Chavez.

Six million people in New England rely on heating oil for the winter months, so that’s a lot of people willing to get a break. But at what price? Is going through times of extreme effects of the economy the price we have to pay for living in a free society? I would think yes. But really, this is just a bad response to rising oil prices.

So, how much cognitive dissonance do you have, New Englanders? I’m sure plenty of the traditionally blue states up there love Chavez calling President Bush “the devil” and such, but do you really want to increase diplomatic relations with a country run by a man who recently tried to resurrect Hitler’s thought police policies?

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

House Speaker Nancy Pelosi has taken the position that President Bush should open up the Strategic Petroleum Reserve to dump oil on the market and drop prices, a move the President rejects.

Pelosi says, “Today, the price of oil per barrel dropped $6.44 in one day–the second highest one-day drop in history–when the Federal Reserve Chairman predicted lower U.S. oil consumption. The biggest drop in history came 17 years ago, when President George H.W. Bush released oil from the Strategic Petroleum Reserve in 1991 and the price per barrel dropped 34 percent in one day.”

Which of course plays into instant desires of a public who are paying $4 to $5 a gallon nationwide.

The current President Bush, however, argues that there’s no need to get oil out of the reserve, which he stopped filling in May due to Congressional pressure, because it is only to be used in an emergency, which the country is not facing. High gasoline prices, while an inconvenience, have not greatly reduced American energy consumption, and there has been no major disruption to supply.

So unless Venezuela decides to cut us off from our supply, it looks like those 706 million barrels are staying put.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

Iran launches missiles! Oil jumps up $9! Bush pledges to allow offshore drilling. It’s down $7!

If the oil price market was a human being, it would be a schizophrenic. But in business this is… oh, who am I kidding. This is still schizophrenic. But with supply being tight, the economy being uncertain and China and India on the fence about how much they will increase fuel prices, it seems like we can expect roller-coaster economics for the time being.

If nothing else, this scenario will enable energy to remain a top issue in the upcoming election. Interesting note: adjusted for inflation, oil prices have now surpassed ceiling price established in the 1860s. So there is legitimate concern for increased prices. Part of the reason why prices dropped was because of uncertainty in the market. You can’t have one section of the economy doing VERY well without it affecting other parts. And with oil dropping off in one day the most it has in 17 years, it’s very obvious that speculators are not sure how to read the market.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

Well, it took $4 gas, $140 oil and related negative effects on the economy, but President Bush has officially lifted the presidential ban on offshore drilling that his father had signed into law 18 years earlier.

This is an incredible turn of events, and one that shows leadership on the part of the president (a president displaying leadership skills? Pull my other leg!) Now, as much as I would love to lay claim for putting the idea in president’s head based on a previous blog of mine, my earlier concern of backlash against the policy remain an issue. Opponents are going to make the “we won’t see immediate benefits” argument. But his address does hit on all the right arguments. We don’t have enough oil to fulfill our needs, we’re too dependent on foreign reserves and our lack of refinery capacity means we have to buy refined fuels from other countries.

There is no reason a country as advanced as the U.S. should lack refineries or squander opportunities at home. Now the question remains what we do when those reserves are tapped, but at least increased domestic production will buy us some time. Would you rather be working on alternative fuels while we’re still running off of hydrocarbons from our own sources or when we’re importing 100% of our energy and have to find time to do so when we’re not also dealing with our economy fluctuating everytime some despot screws up production somewhere? You want to see what the world’s like with zero spare capacity? I know I don’t.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

So, we end our little week of oil on film with a keeper, the recent Award-magnet “There Will Be Blood.”

In some ways, it’s a counterpart to “The Stars Fell On Henrietta.” Both tell stories of ambitious oil men in a bygone era, struggling to compete in a business that changing the landscape around them, leaving some people rich and lot more with broken dreams.

Daniel Day-Lewis plays Daniel Plainview, a silver prospector who turns to oil and begins to make a name for himself as an independent. Plainview is a man driven by acquisition, not seeking money for money’s sake but rather to help him escape the human race which he so dearly despises. Along the way he collects an orphaned child and raises him as his own, not so much to mentor the child but rather as a walking advertisement to play into his customers sympathies, and just to have someone to talk to when he’s bored.

Naturally, he’s a psychotic man given to fits of anger, but that’s part of his natural character, not a product of the environment he works in. He deals with Paul Sunday, an eccentric preacher who’s using the money generated by the oil-rich community to further his church and missionary work. But Sunday clearly is a scam-artist, but perhaps one who’s not even aware of his own foibles. Plainview could care less for him as a human being, but sees him as a rival for the people’s love and personally dislikes his actions.

Plainview gets one scene in the movie where he convinces the community of Little Boston, Calif., of how revenue from oil production is going to improve the town, allow them to build schools, homes, stores, roads. What’s interesting about this scene is how it’s presented. There’s this sort of sinister tone that the scene is overlaid with, as though Plainview is corrupting the town with his presence there. But the fact is, despite the movie’s attempt to play up the negatives, the fact remains that the town does benefit from the added money. Yet somehow, the transformation of a dirt poor California town to a bustling community is seen as negative.

Of course, the community is using its funds to embolden Sunday, which is perhaps the real danger here. So somehow this all comes to a head with Plainview rich and further dissatisfied with his existence. As the movie promises, there is indeed blood to be had, but not necessarily in any cathartic way.

Much like “The Stars Fell On Henrietta,” you can argue that this is just a period piece that recreates the early days of oil . The movie has excellent production values, good actors and what looks to be an authentic recreation of the turn-of-the-century oil business. But it doesn’t seem to earn it’s condemnation of the industry, instead just being a character study of a very angry, disturbed and violent yet none-the-less talented man who knows his business

And of course, you may find the expression “I drink your milkshake” stuck in your heads for days afterward.

Closing thoughts: The movie seems to think that the oil industry was founded by misanthropic, superficial sociopaths who still managed to provide a valuable service to the community, and Oral Roberts and Jim Bakker all found their spiritual inspiration from fast talking preachers from yesteryear.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

Deciding to take a break from the pessimism of the last few films, I encountered a little-seen but enjoyable film that deals with the oil industry in a morally neutral way. Which I suppose by the basis of most Hollywood films is at least a step in the right direction.

“The Stars Fell On Henrietta” is a story about Depression-era oil men and the fortunes they sought. Robert Duvall plays Mr. Cox, a down-on-his-luck prospector ambling from place to place in 1935. While hitching a ride to California, a stop in a small Texas town proves fortunate. While wandering around an open field, an almost supernatural force alerts Cox that there is a major reserve in the area. The trouble is, he doesn’t have the $5,000 necessary to drill the land, so he tries to talk a local farmer into helping him. The man and his family smell a scam, but Mr. Cox seems so sincere that they begin to snoop around for oil themselves.

They eventually all get back together, drill the well all with that mystical Americana filling the screen.

Well, first off it was rather enjoyable to see a film that never once treated oil like it was an evil product that ruined lives, destabilized governments and got Billy Bob Thornton killed. In fact, to make up for “On Deadly Ground,” Thornton shows up in this film as a likable oilfield worker who doesn’t appear to want to kill Indians. It’s amazing. There are some villains here, such as Brian Dennehy as Big Dave McDermot, an obnoxious oil baron who humiliates Mr. Cox. But he’s not some crazed monster driven mad by the foul demon petroleum. He’s simply a man who’s appetites outweigh his common decency, and really he can be transplanted as a tycoon during any boom era in America (gold, railroad, banking) and still be the same character.

The movie is not without some criticism for the industry, but not because of the nature of the product, but rather that old Hollywood chestnut about the little guy competing against the robotic, gluttonous nature of big business. Somehow, the movie seems to think that oil discovery was somehow more earnest and magical when when it was conducted by ornery ol’ coots dancing around in open fields with their cats instead of with geologists, third-party agencies and environmental reports. And of course, Mr. Cox isn’t motivated by money (which would make him just as bad as McDermot, apparently) but instead by the joy of discovery.

All in all though, not a bad movie. And for once, the glory of the independent American spirit is shown to be something that business thrives on instead of vehemently opposes.

Closing thoughts: You too can be an oil man if you have endless optimism and are willing to commit a few robberies along the way to finance your operations. Also, if you put your ear to the ground and hear the ocean, you might be sitting on top of a future gusher.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

After yesterday, any movie was going to be an improvement. But as a follow-up, this one is only slightly better.

You know when Hollywood wants to tell an important story (ie Oscar bait) they have to tell it by covering human suffering and indifference and irrational hatred and injustice and… whoa, better stop, otherwise I might get hired as a presenter at the next award show.

So this lead us to “Syriana,” a 2005 political thriller involving the U.S government’s and U.S. energy companies’ dealings in the Middle East. George Clooney, in an Oscar-winning role, plays a CIA field agent who does his best to play terrorists off against each other and have them killed by selling them faulty weapons. Matt Damon is the energy analyst who knows that Peak Oil has already happened (not believes, KNOWS) and that companies and governments are squabbling over the last remaining drops of crude. Plus there are subplots about an Arab prince and the threats on his life, the attempts of super independent to have due diligence of a merger with companies who have access to key Afghani reserves, a lawyer for the government who opposes the merger, and some other stuff as well.

Well gang, no movie ever won an Oscar for showing international dealings being accomplished by having private dinners, auditing committees and price negotiations, so that means backstabbings, political chicanery, secret deals with terrorists and assassinations are the order of the day.

The story is convoluted but that’s the point, you’re supposed to be immersed in all the criss-crossing plot patterns involving poor, neglected Middle Easterners being exploited by U.S. oil interests, peaceloving princes who would rather spend their money on local social programs instead of buying junk for the U.S. like planes and indoor ski slopes being taken out by the U.S. Army who would rather deal with the a–hole they know rather than the philanthropist they don’t, families being broken up, the wrong people getting richer and lots of death and destruction.

But really, you’re just being force fed so much propaganda that the producers hope some of it sticks. Now, far be it for me to argue that the CIA isn’t capable of orchestrating foul play from behind the scenes. But the movie has such a pessimistic outlook on business dealings that one has to imagine it came from a Charles Dickens novel. How did this happen? Well, the simple answer is, telling a story about hard work, determination and success doesn’t win Oscars. Life sucks and we’re all screwed on the other hand… cha-ching!

Okay, gross oversimplification, but one turn deserves another. So what else can you say about a movie that’s messages are: “We’re running out of oil, oil companies are indifferent to suffering, the government likes killing people and George Clooney should be treated seriously as an actor.” All vile things to take into account.

Closing thoughts: Hollywood conspiracy movies are great to watch if you hate the human race, and after writing this and “Traffic,” screenwriter Stephen Gaghan should immediately write a screen play exposing the violence, racism and government corruption involved in the candy industry.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com