Energy Politics

I suppose this has been sparked as a result of yesterday’s post, and also a few other things running around my head lately. But something has been bugging me about Americans’ consumption of natural resources produced in other countries.

Namely, that we Americans casually purchase luxury items that are costing people lives in other countries, such diamonds that are mined by slave labor in Africa, gold coming from crooked mines in South America or oil that is found in unstable countries. A common complaint is that we Americans turn a blind eye to tragedy around the world just so we can be surrounded by shinies.

Case in point: A civil war in the Congo is being raged concerning, among other things, the mineral rights to mines that produce coltan, a necessary metal used in the production of computer chips found in CD players, cell phones and Play Station video game consols.

The argue is that lives are being lost in Africa just so we Americans can live comfortably.

However, it should be noted that Americans’ desires shouldn’t be seen a zero-sum game. People don’t NEED to die just so we can have coltan. It’s just an unfortunate reality that it happens to be in a country with such a negative background.

As for Americans turning a blind eye, there may be truth to that, by cognitive dissonance is what allows all human beings to operate. I’ve been around protestors and activists who are “always on.” They want to talk about misfortune all the time. But we can’t live like that. Unfortunate side affects aside, we shouldn’t suffer as a society just because another society does.

Let’s face it, the problems in the Congo are fairly self-inflicted. So are many of the issues effecting other mineral operations, be it oil, gold or diamonds. The fact that Americans want these things isn’t evil. The fact is these countries refuse to move past their racist tones within their borders. Naturally, the shadow of colonialism in many of these countries runs long, so it can’t be discounted that even less that 50 years many of these nations were merely puppet states of a European power.

But the problem is that killing somebody instead of working together is what screws up these countries, not Americans’ desire for consumer gizmos and bling. We have plenty of mineral deposits here in the U.S., but no one gets killed for them. Properties are regularly passed from owner to owner without a single bullet shot. It CAN be done.

So are we profiting off other people’s misery? Possibly, but we could just as well be profiting off their prosperity. All they have to do is set down their guns, burn all those damn Karl Marx books, kick anyone spouting ignorant 19th century rants out of office and just get a job.

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

Stand anywhere in the vicinity of a college campus, coffee shop or movie studio and you’re bound to hear some invective thrown around at the oil industry. It’s evil, it’s wrong, the companies do bad things! Things of that nature.

I’m not going to debate whether or not oil and gas production are evil, but that would be a fun topic for future discussion. No, the topic today is whether or not energy companies are “evil.” Evil in this case being soaking consumers for a maximum amount of profits. I’ll leave it up to you to decide if such a thing, if it is true, constitutes as being “evil” and not just as “something paying customers don’t like.”

The blog Government Is Not Your Daddy cited some interesting statistics about how much money energy companies have to fork over to the government, and how little profit they actually make compared to other industries.

Naturally there was some arguments from detractors of this posting, with people whipping out the other costs associated with the industry, namely the “moral costs” of things like polluting the environment, lying about global warming and other things that would make Care Bears cry. That’s another topic again, so for now, think about how much of a gallon of gasoline is going in Rex Tillerson’s pocket and how much is going into the national treasury.

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

Bloomberg warns that Venezuelan President Hugo Chavez will be facing some serious problems due to$60 oil. Naturally, some of his programs are going to have to suffer, but he’s resilient.

And of course, the U.S. is to blame for this. Chavez was quick to throw the blame on his favorite punching bag, King George of the United States. Big, bad America went and screwed up the whole world just to make Chavez look bad. I’m sure that logic works out somehow.

But Chavez is trying to make amends with the U.S., somewhat, offering to let the U.S. ambassador return after the presidential changing of the guard in January. However, that might mean Chavez having to fess up to a few things. It’s worked out great in his favor to have Bush as a scapegoat for his economic failings, but once Barack Obama gets in and his country is still crumby, then what?

I’m going to guess that Chavez is going to go racist, claiming Obama is a traitor because he refuses to turn the U.S. into a new Bolivia. You know, poorly run but with a heart when it comes to the poor people, making sure they get just enough love to stay loyal but not enough to become successful or self-sufficient (those kinds of people tend to think about money. Ick!)

The demand for oil may be down but the dollar is gaining in value. Countries like Cuba are trying to bring in some dough with its offshore oil discoveries, and likewise distance themselves from Venezuela. But those are all bad things according to our socialist friend! We Americans need to just stop being so darn successful, because we’re making Chavez look bad! Shame on us!

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

Well, it’s come to this. GM, Ford and Chrysler are crawler to Uncle Sam, begging to get a slice of that $770-billion pie. The companies are asking for a piece of the bailout due to bad fiscal quarters, with concerns that the companies themselves could be in jeopardy if swift actions are not taken.

This brings up the question of whether or not we should be bailing out the auto industry. There’s good arguments for yes and no.

On the no side, this is business, and you’d think a company would be responsible for maintaining itself. If the auto industry was losing money, it certainly wasn’t due to shrinking in demand for automobiles. Too much of the fleet was dedicated to SUVs and the American auto industry was very slow in getting it through their heads that the days of $1 gasoline were over. While Toyota and Honda were hopping on the hybrid bandwagon early, Ford and GM were still slavishly putting out gas guzzlers even as it became apparent they were no longer in demand.

A sacking of the corporate management wouldn’t be too bad either. These guys get paid millions of dollars because supposedly they bring industry insight and have the knowledge to keep the company solvent. They’re supposed to be experienced enough to make at least reasonable predictions about the market. Well, good work guys!

Also, one of the reason why the auto industry is in such dire financial straits is because the union contracts and health benefits are sucking them dry. By filing Chapter 11 and reorganizing, they can renegotiate the contracts into something that’s a little more rational.

And finally, I think the real problem here is lack of diversity in the American auto industry. I don’t want to hear anything about The Big Three. There’s no Big Three, there’s the Only Three. By having only three major automobile companies, it just encourages this kind of problem to happen. Back when Ford, GM and Chrysler also had to compete with American Motors, Studebaker, Packard and others it was unlikely that a bad fiscal year for one or two companies could spell certain doom for the entire industry.

But on the other hand, there is national pride to take into account. The loss of GM, Ford or Chrysler would be devastating to the American psyche. I don’t think any bankruptcy would be long-lived, as investors would rush to buy the tattered remains of the companies and get them working again. But being out of the game for a few years would open the door and allow foreign car manufacturers to grab a larger chunk of the car market.

Plus the fact that the Only Three employ 3 million workers. Imagine putting that many workers out on the street? Think our economy is bad now?

Look, I don’t want to lose the American auto industry.  But we have to have some accountability here. And if we do decide to bail them out, I want them kept on a very short lease. I’m talking about making more fuel efficient vehicles, which is the whole reason so many consumers jumped over to Toyota Priuses to begin with. And no Detroit, 25 miles per gallon is not “fuel efficient,” not when we have the technology to get at least 35 miles from a gallon.

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

USA Today reports that a new study by the  U.S Department of the Interior shows that the government is not doing its best to expedite the domestic drilling.

Energy companies currently hold leases on 68 million acres of federal land but are not producing on them. President elect Barack Obama has supported a “use it of lose it” strategy to force E&Ps to produce on the lands they already hold leases instead of continuing to acquire new ones. Current undeveloped lease acres alone have the potential to double U.S. oil production.

In order to encourage E&Ps to start producing, the Interior Department recommends offering a lower royalty rate for faster production and shortening the term of the lease. Long-term leases apparently don’t provided incentive for companies to begin immediate development, which leads to large tracts of land being held by companies that are more concerned with other matters, such as acquiring further leases.

I for one hope this policy catches on. It’s one thing to face legitimate setbacks for drilling, but another thing to keep gobbling up leases and holding onto them, keeping them off the market from more ambitious E&Ps that would turn around and start developing them quickly.

Of course, the big bugaboo causing delays, especially on Rockies and Great Plains acres, are environmentalist concerns. Groups worried about effects on the environment or how oil production equipment will affect local wildlife can hold up production for months or years. To allow the “use it or lose it” policy to work fairly, the government must take a two-step program of requiring fast development and at the same time severely limiting the impact of frivolous lawsuits and legal challenges on public lands.

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

The votes are in and the die is cast: Barack Obama will be our new president come January.

It was a long election. I mean, a really long one. Democrats started their campaigns a year early as a show of their impatience eagerness to kick George Bush out of office. Republicans soon jumped on the bandwagon and started as well.

There were times when we thought it would be Hillary Clinton vs. Rudy Guiliani, or John Edwards vs. Mitt Romney. Somewhere in there Chuck Norris endorsed Mike Huckabee and a bunch of singers wrote songs about Barack Obama. It was a strange election to be sure.

John McCain put up a good fight but in the end he had too many strikes against him. He was 72 years old, which brought up questions about his health, he chose a relatively unknown Alaskan governor as his VP choice, which scared a lot of people who didn’t want her at the reigns should McCain pass on, and of course the stigma of an unpopular war in Iraq and the recent economic crisis may have made any Republican candidate persona non grata during this election cycle.

Barack got into office with an unprecedented amount of minority and young adult votes. Many black voters voted for one of the few times in their lives, which I find a little startling, actually. While I commend them for making their voices heard, one does have to ask if maybe the reason why minorities haven’t been better served in the past has less to do with this nation’s social structure and possibly more to do with a self-imposed exile from public life.

So, what does this all mean for the industry? Well, Barack is not opposed to increased oil production, but it’s not at the top of his priority list. He most certainly will seek to impose some sort of windfall profit tax on the industry eventually, but he’ll probably be too tied up with the Iraq war and the economy at the beginning of his administration to be concerned with that immediately.

There will be plenty of time to criticize any crazy policies he tries to enforce once he takes over the White House. But for now, he’s won a long-fought contest for the highest office in our land. He’s shown grace in his victory and he’s been admirable, so I look forward to the next four years with curiosity and not dread. Congratulations Mr. Obama, you’ve earned your victory.

And at the very least, all those whiny Europeans will have to shut up for a while. Hey England, France, Germany and the rest of Western Europe, you think you’re so progressive? We just elected a minority to presidency! Haha, trump that!

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

Well, the past two years just dragged on and on, didn’t they? Know what I learned of importance in that time? That Barack Obama and John McCain both have a lot of dirty little secrets.

But the questions remain. Does Barack’s early lead suggest he has this election in the bag. Or did a bunch of overly ambitious Obama supporters run out and vote while McCain’s are waiting for Tuesday?

Well, this is going to be an interesting day tomorrow. We have two candidates with different views on energy, and this may affect outcome as well. Remember, Obama started making noise about capital gains taxes back when oil was over $100 a barrel. But now that prices are starting to drop, energy costs aren’t as big as concern to Americans.

Energy should be a big concern regardless of the cost, since it affect national security and our economy as well.

Americans are also going to vote if we should stay the course in Iraq, much as McCain has advocated, or pull out of an unpopular war, as Obama has.

So I urge anyone who hasn’t to go out and vote, and vote your conscience for whichever candidate reflects your views. Me? I already voted. Enjoy your long lines tomorrow. Haha!

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

A boy under orders from his father to swipe McCain-Palin campaign signs and replace them with Obama-Biden ones got a shocking lesson yesterday morning.

In North Carolina, where Barack Obama is currently leading in votes,  McCain supporter Shawn Turschak had apparently had campaign signs in his front yard stolen several times. So to combat this, he hooked an electrical current from his pet fence up to his latest sign. When the nine-year old son of Andrew Noble attempted to swipe the sign, he got a jolt. The father of the boy then confronted Turschak, and later the sheriff swung by to check on the situation.

Video of the encounter is up on YouTube.

The father’s excuse, by the way, was that his son was just going up to the sign to see how it was set up. I swear, that was the excuse he came up with. These types of people are so precious to me, I mean it.

Now, I know I should boast of anything, but there’s a good analogy in here about Obama’s policies. This kid, while acting under orders from a superior, decided to steal someone else’s property and replace it with something the owner did not want. The owner fought against this theft and was scolded by the thief for not being neighborly and allowing him to tamper with the owner’s property.

So now, in the closing days of the election, we have a nice little metaphor for what people can expect with the possible Obama election. Unfair to read that much into it? Yeah, of course it is. Still, we have to have something to laugh about in these final days of campaign agony.

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

Can it be? Is it possible? Are there really only six days left until this endurance contest is over? Next Tuesday, Americans will decide who the next president will be. Thank goodness!

It’s been a strange two years.  The never-ending campaign has been soul-sucking. Never before have I seen a contest stretched for so long, with so many talking heads, political movies and late-night comedy.

I’m exhausted. I have a feeling the country is exhausted. We just want it to be over. Stick a fork in it, it’s done. But it’s not. There’s still so many hours left. Enough to inundate me with more talking points than I could ever care to learn.

So now, as the oil industry enters a strange phase, one must wonder just where it’s going to be in the aftermath. Opening up more domestic drilling was great campaign rhetoric, but now that our focus is on the economy and not our gas tanks, I wonder how much the American voters will consider the effect their vote will have. Probably not very much, as energy is not as important an issue as national security, health care and the Iraq war (actually, it is, but don’t tell that to the voters, they’ll throw daggers at you).

So get ready people, maybe it will be Morning in America again, or whatever populist rant gets your goat. For me, it’s just four more years of nonsense to look forward to.

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

Remember back in July when everyone was gnashing their teeth and screaming invective at the oil industry in the wake of $150 oil? Remember how politicians were screaming about crooked companies? How Exxon’s record profits were fodder for late-night talk show hosts?

It all seems like ancient history now. At $60 oil, where is the anger? Where is the frustration? Where are the calls for revenge, the demand to have energy executives arrested and perp-walked down Wall Street? Where are the screams to nationalize the country’s oil reserves, to investigate energy firms for manipulating prices? Where did all the hatred go?

Gone. Swept away. Maybe’s it’s the election buzz. Maybe people became anesthetized after sitting through “High School Musical 3.” Maybe the fairy godmother wished all the badness away. Whatever the case, gasoline is down to $2.20 a gallon and things are starting to get quiet as the energy prices readjust themselves.

It’s certainly not a time to celebrate for everyone. Natural gas prices as hanging just above $6 per MMBtu, the minimum threshold needed to keep unconventional gas plays like the Haynesville shale solvent. OPEC certainly isn’t happy about this drop, which will cause lots of problems for the member countries’ social programs. And the sudden drop in prices have caused several energy company executives have to take on the role of distressed sellers as they forked over their company shares to cover margin calls.

But for the American public? It’s like Christmas has come two months early. True, energy demand had been down for quite a while, and the market was so out of whack that prices jumped up to an all time high seemingly against the reality of worldwide demand. Overall energy usage is down despite the drop in prices, which suggests the American public still hasn’t found its price equilibrium yet.

But the rage levels from a few months ago have for the most part subsided. No telling how long it will last, but it remains obvious that when it comes to the public’s perception of the energy industry, the anger is only as strong as the cost of the last trip to the gas station.

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