Energy Politics

Jeff Spicoli has decided to surf some major waves down south of the border, meeting with Big Kahuna Hugo Chavez.

Yahoo! reports that Chavez said he met privately with actor Sean Penn on Wednesday, and that the Oscar-winning celebrity may film a movie in Venezuela .

Chavez also took another swipe at President Barack Obama, saying that he should earn his Noble Peace Prize by halting plans to increase U.S. troop numbers in Colombia.

Because, you know, stopping terrorists and drug kingpins is the antithesis of peace, I suppose.

Penn remains a strange creature. He seems to admire Chavez for doing the same stuff he hated former President Bush for doing. But I guess since Chavez is on the left end of the political spectrum, that covers all sins.

Now, I myself don’t think Obama has earned the Peace Prize. In fact, ever since Yassir Arafat was awarded one I started to serious question whether or not these things were actually rewared by by sane, rational people or if they were just randomly handed out as prizes in Cracker Jack boxes. But that’s apples and oranges here. Chavez is in no position to criticize someone else for interfering in Colombia, not after he got busted last year laundering money to FARC.

As to the secret meeting between the two. We can only speculate what discussions took place. Oh heck, let’s just speculate out loud!

Penn: “Hey bud, let’s party!”

Chavez: “Yes, yes! Let us party by shutting down some TV stations that don’t support my regime that are opposed to our glorious revolution!”

Penn: “You got to understand man, politics is about, like, making everyone happy and giving people stuff for free. Like good tunes and some tasty waves!”

Chavez: “The evil Americans don’t want there to be good tunes and tasty waves! That’s why they are secretly causing global warming! It’s an imperialist plot to make tropical countries unlivable!”

Penn: “Hey man, I just got a great idea! Let’s shoot a movie down here! We could make some righteous bucks!”

Chavez: “Yes, of course! We can use only government approved workers, just like the ones who run PDVSA!”

Penn: “Uh, thanks there Chavez, but it would be more gnarly if we had professionals who actually know what they’re doing. When’s that pizza getting here, I’ve got the munchies!”

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

A couple U.S. oil refinerers have been buying oil smuggled in from Mexico, and must now return the money to Pemex.

To make matters worse, the oil is being smuggled by drug gangs, who have been illegally tapping into Mexican oil pipelines. Apparenly even criminals are being hit with the recession and have to branch out into new business ventures.

Donald Schroeder, president of Houston-based Trammo Petroleum, is scheduled to be sentenced in December after pleading guilty in May. Schroeder purchased $2 million in stolen Mexican oil that had been brought across the border in trucks and barges and sold it to various U.S. refineries. Trammo profited about $150,000 in the scheme.

So far, the scheme seems to be small scale, with only Trammo implicated. The company sells at total 2.1 million barrels a year, a minuscule figure compared to major refiners like Valero or Exxon, so odds are this a just a relatively small-scale operation. The good news is that U.S. and Mexican officials have been working in conjunction to bust up this ring, so three cheers for international cooperation.

This opens the door for all sorts of new ventures of money-desperate gangsters. If they’re in such need of money, I suggest they take advantage of our Cash for Clunkers program and turn in their old gas-guzzling trucks and get more fuel-efficient cars to smuggle drugs across the border in. Maybe a reality show where they hunt down snitches. It could be called “Survivor: For Real!”

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

Mahmoud Ahmadinejad, will you please go now!
The time has come.
The time has come.
The time is now.
Just go.
Go.
Go!
I don’t care how.
You can go by foot.
You can go by cow.
Mahmoud Ahmadinejad will you please go now!
You can deny the Holocaust.
You can worship Khomeini.
You can go scream ’til you’re blue about Mousavi.
But
Please go.
Please!
I don’t care.
You can go
By blimp.
You can go
On a Shrimp-Blimp
And look like a pimp.
You can scoff at the deaths of protesters
You can blame things on your predecessor.
Just go, go, GO!
Please do, do, do, DO!
Mahmoud Ahmadinejad
I don’t care how.
Mahmoud Ahmadinejad
Will you please
GO NOW!
You can scream its unfair.
You can toss a chair.
You can run off to Russia
To ignore the despair.
I don’t care how you go.
Just get!
Mahmoud Ahmadinejad
I don’t care how.
Mahmoud Ahmadinejad
Will you please
GO NOW!
I said
GO
And
GO
I meant . . .
The time had come
So . . .
Mahmoud WENT.

(In memory of Neda Agha-Soltan and the other victims following Iran’s recent reaffirmation of its dictatorshop election.)

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

In 2004, when “Team America World Police” was first released, the prospect of Jim Jong-Il, the always offensively insane yet seemingly marginalized dictator-for-life democratically elected leader of North Korea being a serious threat to world stability seemed humorous at best. Oh sure, he was a threat to the South Koreans and Japanese, but he seemed more interested in putting on musicals and getting Elvis haircuts then in flexing international muscle.

No longer. The little dictator is now threatening to wipe the U.S. off the map. Which I suppose is par for the course for dicatorships today. Still, with North Korea playing the victim card and trying to blame the U.S. for trying to provoke a second Korean War, we do need to keep on our toes.

Besides, do we really want another Korean War anyway? The only good things that came out of that last one were one-half a penisula that lives in the 21st Century and an overrated movie that spawned a TV show that ran for 12 years.

So get ready America. Kim Jong-Il is on the march. Just as soon as watches 20 movies from a country he claims to despise to its very core.

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

So we have Hugo Chavez on the nationalization warpath again, pulling a snatch-and-grab on Williams’ midstream assets as some trumped up charge.

Now of course, this hasn’t gotten much in the way of the mainstream media attention, not like Chavez’s recent media blitz where he was appearing on numerous television and radio shows to expose his views to as many people as possible. But enough about state-sponsored terrorism, let’s talk economic justice.

So, we must now turn to Wheel of Morality to decide the proper ethics to give us comfort during these trying times…

Wheel of morality, turn turn turn,

Tell us the lesson that we shall learn…

Today’s moral is: bullies always threaten to take the ball home with them if you don’t play the game their way…

Well, let’s just chalk this one up to lesson learned. There’s still plenty of oil and gas companies who keep waiting for Chavez to get on that capitalism bandwagon. “Any minute now, he’ll see he’s running his country into the ground, and when he does, we’ll be grateful we stuck it out during tough times so we can reap the rewards now!”

Folks, it ain’t going to happen. Chavez just got a term extension and could conceivably be president for the next decade. And how did he win his support, you might ask? Surely by providing superior economic models and making superior arguments to his opponents, right? Nope, he pulled a Karl Rove and attacked the patriotism of his opponents, blamed all his domestic problems on foreign devils and promised his constituents free goodies for the rest of their lives. How could he lose?

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

So, here’s a good analogy for the industry. Think of oil and gas in terms on Hollywood. No, it can work, if you stretch the definition of reality far enough.

Okay, for companies you’ve got your independents, your operators, your supermajors and your joint ventures. I’m not going to go into MLPs because that’s just crazytalk during the current environment.

Your independents function sort of like independent movie studios. They could be B-movie studios, which make a lot of cheesy but profitable pictures. Think of your locally owned oil companies that have some assets and don’t really venture outside of their safe zones. Maybe 20-50 barrels per day, at most. These oil companies don’t make production that would be number one at the box office, but they at least can clear their overhead costs. You also have your art house movie studios, basically companies that want to make a small number of pictures that can affect their audience greatly. These are the innovators that are out to change the world. In the oil industry, this would be independents like George Mitchell’s Mitchell Energy, which spent decades making the Barnett shale economic. He ended up making history, and we’re still talking about it now.

Next we have operators, which could be stand ins for the production companies in the movie industry. It’s their job to actually get the work done, doing the day-to-day grind and making the minute decisions. Think along the lines of Ron Howard’s Image Entertainment, a production house that latches unto larger studios to distribute the films. You didn’t think the brass at Columbia Pictures was doing the actual heavy lifting to make “Angels and Demons,” did you?

National oil companies function with government assistance and often function to provide revenue for social services in the host county. Much as national film endowments that provide funds to filmmakers in several countries. The downside of this is that often times the people don’t like what it is being carried out with their tax dollars. This can lead to Venezuelans revolting over how PDVSA is being run, or Canadians getting indignant when they see the kind of movies David Cronenberg was making in the mid-1970s thanks to subsidies from the National Film Board of Canada.

Finally, you have your supermajors and superindependents, like Chevron and Marathon. A small number of companies who control a large number of assets. Namely, your Warner Bros. and 20th Century Foxes of the energy industry. They’re large, control a notable portion of the market, and have been around for decades. Also, like movie studios, they sometimes gobble up smaller companies and add them to their ranks. They can use them as subsidiaries to hold smaller projects, like say Warner Bros.’s ownership of New Line Cinema in order to give the appearance of being an independent studio while secretly being controlled by corporate interests.  Or they may be necessary to gain access to other sources of revenue the main company can’t normally access, such as in foreign countries with different copyright laws.

So hopefully that helps. Next time you see some news about ExxonMobil, just think about Warner Brothers. When hear about Devon Energy, ask yourself what View Askew Entertainment is up to these days. And when some local oil company finds a gusher, just smile and know that another Quentin Tarantino has been discovered.

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

Barack Obama and Hugo Chavez were just the best of friends last weekend at that Summit of the Americas, shaking hands and exchanging books and whatnot.

But this does not bode well for the American public. As former U.S. House Speaker Newt Gingrich says, being too cozy with a commited anti-American leftist is not a good idea for our nation’s morale.

But it’s that just like America? Ronald Reagan shaking hands with Mikhail Gorbachev, Richard Nixon meeting with Mao Zedong… I guess it’s not a show a weakness so much as a realization that we must deal with our biggest critics in at least a cordial way when meeting them face to face.

But Chavez, being the attention whore that he is, gave Obama a book critical of the U.S. involvment in South America,. Shame Obama didn’t have a copy of Adam Smith’s “Wealth of Nations” to shove back int Chavez’s hands. That would have been priceless.

What message does this meeting send? I’m not sure yet, but I’ll keep my eyes on how this plays out politically. Last thing we need is dictator-for-life Chavez’s position being legitimized in the public arena.

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

Brazil turned down an offer to join OPEC today, according to the Associated Press.

Brazil is staying on the sidelines, saying that it is not a big enough exporter to consider joining the organziation. The country, which could have up to 80 billion barrels of reserves offshore, is keeping clear from the group for the time being. Which I say is fair enough. There’s no rule saying that OPEC is the only organization that can represent oil-rich nations.

Now, I doubt there will be any rival oil cartels coming into existence, there’s just not that many oil producing countries in the world. Yet. Hey, these oil volumes are recent discoveries. Who knows where else there could be fields? Hey, who’s to say that Micronesia isn’t sitting on the world’s largest oil field? We could end up having a another group calling themselves OPEN: Organization of Petroleum Exporting Nations.

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

“We have met the enemy, and they are ours.” — Oliver Hazard Perry

Last weekend, the U.S. Navy rescued Captain Richard Phillips from Somali pirates, killing three hijackers and taking the fourth into custody. Mad that we didn’t play their game, the pirates then threatened to kill American sailors as retribution for their fallen comrades.

The political blog The Huffington Post seemed to almost take glee in Somali actions, posting “THEY’RE BACK!” at the top of the page the day after the succesful rescue mission, as though the threat of Somali attacks was sometime that demanded fearmongering or something.

Look, international oil shipments, since tankers seem to be a favorite target of pirates in the region, are not floating cash cows that exist to subsidize failed governments. I’m sorry your country is in collapse, but holding people hostage to get money is not admirable nor will it fix the problem.

If nothing else, this only breeds resentment from the rest of the world.

Now, I read that the reason why most governments and businesses choose to pay the ransom demands is because the hostages are generally treated humanely by their kidnappers. Yes, and often times abusive husbands buy their wives flowers and tell them they didn’t really mean it. Folks, piracy is wrong. Taking people hostage is wrong. Holding a gun on someone is never a good idea, because you may be pushed to use it.

We don’t solve the piracy problem by appeasing kidnappers. But we don’t solve it with gunfire either. I’m not sure what can be done in the short-run to end these actions, but we’re going to have to get serious about dealing with these issues. Africa is a mineral-rich section of the world, and it’s in everyone’s best to share the wealth.

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

There’s a scene in the latest James Bond movie, “Quantum of Solace,” where MI6 director “M,” played by Judi Dench, is being chewed out by her superior the Foreign Minister, played by Tim Pigott-Smith. When arguing about doing business in order to gain access to oil reserves, M asks if it’s a wise idea to ally with people who operate in unethical ways. The Foreign Minister responds that with the U.S. and China carving up what’s left of the world’s supplies and Russia not playing ball, “… right and wrong don’t come into it, we’re acting out of necessity!”

That gave me pause. Right and wrong don’t come into consideration when you act out of necessity. If that’s true, the world is in a lot of trouble. The movie goes on to show a situation where Bolivia is being forced into an artificial drought because of corporate control of water rights, which sadly might have been ripped from the headlines following the real life actions of Bechtel in the company in the 1990s. The company was given private water rights in the country, leading to obscene regulations that could have led to citizens being forced to buy a license from the government in order to collect rainwater.

Water is of course a basic human requirement, which makes complete private control of a necessity such as that very questionable. But oil is a bit trickier. Human beings could, and have for thousands of years, lived without oil and gas. But unlike water, it’s a non-renewable natural resource. Well, yeah, it is, if you don’t mind waiting around for a million years or so.

But I digress. My point here is that in order to have access to oil, geopolitics unfortunately requires politicians to have a sort of flexible morality when it comes to from where we import our energy. I would love to tell Hugo Chavez to stick his oil where the sun don’t shine, but that’s not a realistic move. I would love to tell the Russians to stop playing God with Eastern Europe’s gas supplies, but I lack the abilities to make that so. And let’s not even get started on that perfect replica of Medieval village that we like to call the Middle East.

Until we find a more viable source of energy, it seems that we’re going to have to continue to do business with disreputable business partners. So the James Bond movie got it right: we’re acting out of necessity here.

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