I ran across an interesting article and comment just before I decided to drop off to sleep. I will share my response with you and you can tell me what you think.

The original post is LET THE ENERGY GAMES BEGIN. The comment was:

Rick Says:
September 11th, 2008 at 2:05 am e
Please give me a reference to the statement that “George Bush’s own Energy Department has said that if we opened up new areas to drilling today, we wouldn’t see a single drop of oil for seven years…”
I want authoritative facts so I can warn others that it is not a quick fix to the high gas prices as republicans want to mislead them to believe.

My response is

Rick,

I did not write this post, but I am very aware of the issues it discusses. And I wanted to take a moment to address what has been said so you have a full understanding of what is before all Americans.

It is a fact that crude oil prices have increased roughly 1000% since 1972. It is a fact that oil usage in the U.S. has increased dramatically over that same time period. And it is also a fact that Democrats have long sought to prevent domestic drilling.

But to say that only Republicans are at fault for the current, and future, dependence on oil would be a lie. Inaction by both Republicans and Democrats since the 1970’s are the cause of the crisis. Neither side has effectively presented a plan of action, nor explained to the general public the cost of failing to seek a new alternative.

Currently America will spend some $700 billion on foreign oil. Part of that reasoning is due to the idea of using up foreign sources of oil while maintaining reserves for the future – ensuring the continuation of the American quality of life. That reasoning was solidly in place 30 years ago, and far less so today.

Another reason has to do with ethanol. The U.S. chose to use corn as the base for ethanol, whereas other nations have chosen and effectively use grass and sugar. All these bases for ethanol result in a fuel that is only 75% as useful as gasoline, thus requiring more fuel to be burned. In addition there is a debate on whether ethanol production is amplifying the dead-zones found in the Gulf of Mexico. Lastly by using corn as the base food prices have been forced higher, which is a core inflation factor.

Oh by the way, there is currently a glut of ethanol, with a mandate from the Government to increase that glut by 60% next year. Ethanol is currently available only in 5 states, of which only 2 allow its sale to the public (those 2 being Illinois and Michigan).

Solar energy, geothermal, wind, biomass, oil shale, and all other alternative sources at this time are either ineffective or inefficient.

Because of these facts, the only options that will effectively provide the energy that America requires to maintain it’s current quality of life and allow for research and development of new energy sources are coal, nuclear, and oil.

Coal is available, and starting to gain greater interest though many ecologically sensitive groups are against its use because even the latest developments create too much carbon dioxide and residue.

Nuclear has long been an energy source that Democrats oppose. Fear, without regard for advances in science and safety, and political preferences have held back the development of any new nuclear plants since the 80’s. This is in the face of significantly greener nations like France that use this as an energy source.

Thus we are back to oil. If we are to maintain current energy usage oil is the only logical and constant source. Since dependency on foreign oil is expensive and unreliable domestic drilling makes sense. The money saved can be used to fund alternative sources of fuel.

But will domestic drilling tomorrow cause oil prices to drop tomorrow? Yes and no.

Crude oil is priced like a stock or more accurately an option. Thus the price reacts in advance of actual events most of the time. When OPEC cuts production the price of oil rises long before the supply is affected. When a nation that produces or ships oil is under strife or war the price fluctuates whether production is affected or not.

So on that basis the knowledge that domestic drilling will decrease the demand by the largest buyer, prices will drop for a period of time until other buyers step in to make up that difference. If OPEC does not just reduce production to maintain current prices.

But more importantly if nothing is done today, as it was not in the 70’s, 80’s, 90’s, and on then you are guaranteed to have higher prices 2 years from now as well as 10. And where will the alternatives be then? As more money, maybe $1 trillion dollars a year or more, goes to foreign nations, where will America get the extra money to fund the 2nd, or 4th, or 7th year of research?

And lastly I want to inform you of something that many Democrats, particularly Speaker Pelosi have not made public. Nancy Pelosi makes money every time alternative energy is funded. She owns a substantial position in alternative energy stocks. It’s to her benefit to not allow domestic drilling. It fills her pockets with money every time that the debate lingers.

How is Nancy Pelosi different than the charges made of Republicans when she is in the pocket of Big Wind?

So to answer your question is oil going to resolve all America’s fuel needs forever? Of course not. Will domestic drilling drop the price of crude oil significantly tomorrow, or short-term? Not overly likely, though some effect will happen. Do Republicans understand this, and the alternative? More than you are giving credit to.

But the real question should be this, what alternative is being proposed by Democrats that will ensure the energy needs of America now, and provide any hope of reduced cost and increased energy in the next 2 years? Or 4? Unless you don’t mind not heating your home during the winter, or being unable to use the internet when you wish.

Oil is not the answer, we can all agree on that. But by using oil, particularly domestic oil, we improve our ability to create new sources of energy.

Labels: alternative energy, Crude oil prices, domestic drilling, ethanol, Nancy Pelosi, nuclear energy, oil shale, OPEC

Recently I mentioned how I felt that having Speaker Nancy Pelosi speak on the first night of the Democratic National Convention was a mistake. I felt it was a massive strike against Senator Obama.

“Speaker Nancy Pelosi may look good to the women that only care about having a woman’s face in a leadership position; but anyone that has followed what the Democrats said in the 2006 mid-term elections may have a different opinion. The 110th Congress is a complete failure. The Democrats have failed to do any of the things they promised in their 2006 campaigns. And Speaker Nancy Pelosi led the charge to stalemate.”

I continue to feel that way, and I believe that strike 2 has just been dealt.

“Which brings us to Madame Speaker’s 2007 financial disclosure form. Schedule III lists “assets and ‘unearned income’” of between $100,001-$250,000 from Clean Energy Fuels Corp. - Public Common Stock.” Clean Energy Fuels Corp. is a natural gas provider founded by T. Boone Pickens.

“She, and other investors, stand to gain a substantial return on their investment if gasoline prices stay high and municipal, state and even the Federal governments start using natural gas as their primary fuel source. If gasoline prices fall? Alternative fuels and the cost to convert fleets over to them becomes less and less attractive.”

CLNE also happens to be the sponsor of Proposition 10, a ballot initiative in Pelosi’s home state of California to dole out a combined $10 billion in state and federal funds for renewable energy incentives. Namely: Natural gas and wind.”

So effectively we see that Nancy Pelosi is in the pocket of alternative energy companies. It’s basically the same claim being made by Pelosi and other Democrats against Republicans. And it’s just as bad as what they say the result is with Republicans.

Speaker Pelosi has walled-off any discussion of domestic drilling for oil. She has refused to allow any votes on the subject. And according to her most recent comments on Larry King she will only consider possibly allowing a vote on domestic drilling IF it also includes alternative energy incentives.

Effectively that means that Speaker Pelosi wants alternative energy to get more money to earn more money for herself. The higher the cost for oil, the better her alternative energy stocks will do. And the American public be damned.

Of course many other Democrats believe in this same style of system as well. Senator Obama wants to increase electricity costs, is against domestic drilling (though he has suggested he might be open to drilling in recent speeches – campaign speeches designed to get him elected), and has stated that higher oil costs is good because it will force people to use less oil. Don’t mind the fact that higher energy costs mean more Americans will lose their homes and businesses, and will force a slow down in the economy that makes unemployment higher.

But look at it from a different point of view. Senator McCain stated at 4:33pm on Aug 13, 2008 in a news conference that creating nuclear energy plants would create 700,000 jobs. McCain is also more in favor of domestic drilling.

If there was a move in the nation to do domestic drilling, building nuclear plants, and alternative energy – and each of these ideas would employ 500,000 Americans – there would be a boost to the economy and a reduction in the cost of oil and energy. Speaker Pelosi would make money on her stocks (though not as much) and so would oil companies, utilities, 401K’s, and the average American (via energy cost savings).

But according to Nancy Pelosi and other Democrats, domestic oil is a bad thing since it means oil prices would drop. Also nuclear energy is opposed as well. That’s 1,000,000 American jobs they don’t want to create, at least. That means that unemployment will go higher since businesses of all sizes will not be able to afford the higher cost.

Of course Nancy Pelosi will make more money though.

So I will return to my original thought. Is having Speaker Pelosi speak at the DNC a positive? Especially since she represents a Democrat-led Congress that not only has done nothing they promised in 2006, but is also actively looking to hurt American families. While lining her own pockets with more money.

Strike 2.

Labels: Congress, Crude oil prices, Democratic National Convention, domestic drilling, energy alternatives, Nancy Pelosi, nuclear energy, Senator Barack Obama, U.S. economy

I was looking through the net today, trying to get back on pace with the Presidential election, and I ran across an interesting post by Andy Ostroy on the Huffington Post. Its title is Why Obama Must Become President.

The post is filled with problems. Problems about America’s racial past, our economic current, and our unsure future. It highlights the failures of the President Bush Administration, and several points that I’ve heard ultra-liberals spout since Democrats started announcing their intention to run in 2007. And not once does it give a reason to vote for Senator Obama.

Mr. Ostroy correctly points out the many hurdles that were in the way of a Senator Obama nomination. He hints at the racial bias and emphasis used against Senator Obama throughout the primaries. He even quickly glanced over the fact Senator Obama has virtually no experience. But none of those are reasons to pick a President.

His main reasons why Senator Obama should win can be summed up in these 3 things:
He is Black
He is not President Bush
It’s a good thing for the Democratic powerbase

That’s it.

Now I would love to see a Black President in my lifetime. I agree that

“America needs to get over itself and finally break down these walls of racism. It's time that its citizens stop viewing each other through the prism of color, and focus instead on the person beneath the skin.”

But a President is more than just a color barrier. Racism is a major issue in America, I know because I have lived with its influence in my life. But it is not the only nor main issue in America.

“Whites would finally be presented with a black president and be forced to confront their inherent fears, while hopefully accepting the cultural reality that success or failure in the Oval Office has nothing to do with race. And for some blacks, they would no longer be able to hide behind the contention that the "system" is keeping them down, and instead assume a greater responsibility for their own successes and/or failures.”

This is all true. A Black President would be a great force in defeating stereotypes and excuses all too readily used and portrayed in the media and many people’s lives.

But how would Senator Obama’s color change the economy? How would his eternal tan prevent Iran from creating nuclear weapons? How would the breakdown of stereotypes end the Iraq and Afghanistan Wars, or disuade groups like Al Quida from attacking Americans?

Race is a central theme in America, but it has little power over national economics, international policy, or national defense – to name a few issues.

So I have to reject the premise made by Mr. Ostroy that

“But if Obama loses to McCain in November, that will be an even greater statement of where America is with regard to race. That a candidate from a severely weakened party, who votes in virtual lockstep with Bush, could beat Obama while voters voice that they so desperately want and need change, would signal that having a black president is, in 2008, perhaps too much change.”

The election in November is not about what race the majority of Americans want to lead the nation, but who is the best person. The best person with the best plan – that can realistically be implemented – is the person who should win. That may or may not be Senator Obama, but you would never be able to know from Mr. Ostroy’s post.

Is President Bush’s apporval rating low? Yep, and those of the 2 year Democrat-led Congress are even lower. Government as a whole has failed the American people on many levels. Each party has failed to live up to promises and expectations. President Bush has failed to recognize and react to his mistakes in a timely manner, and the Democratic Congress can’t stop trying to blame the Administration for every ill known to man and actually pass a few of the laws they polispoke their way into office for.

Yet neither potential Presidential candidates has a last name that remotely sounds like Bush or Pelosi. Thus change from the abysmal political leaders of this nation, whether Democrat or Republican, is assured. The question that remains is which is best.

The energy problem in America is the result of 30 years of both political parties failing to act. The only actual answer is to say that America will investigate all energy avenues – including domestic drilling, nuclear, new refineries, switching to sugar and grass based ethanol as well as wind, solar, geothermal, biomass, and so on. But neiter political party is willing to say that, and the candidates both seem unwilling to annoy some of their political followers in favor of a real solution for the nation.

Similar statements can be made about real fixes to Social Security, Education, and the Economy. But when it comes down to it, one of the biggest issues facing this election is experience, not color.

Does America want a President that has decades of experience, or a candidate that will be learning on the job. Both have their good and bad points. Neither involves race. To say that it does is to overstate an issue and bully some into acting in a manner they don’t believe in. That’s wrong.

Mr. Ostroy makes a great emotional post. It sets up a wonderful argument over the importance of how the media and politics still use race to make the playing fields uneven. If this were an election for Govenor, or Mayor, then it might make more sense; but this is about the President and in all honesty it is not a priority.

I have long said that all fanatics are wrong no matter what the cause or reason, and that any decision made based on a fanatical view is misguided in the least. I feel that is true of suicide bombers, bailouts for dumb economic decisions, and elections.

If you want to vote for Senator Obama, or McCain, have a reason. Race is not a reason but a cause if it is the only basis for the decision. It’s fanatical reasoning, and in my eyes therefore inherently wrong. There are reasons to vote for either, and your vote does count. Don’t waste it on just one issue that does not resolve any other issue America will face in the next 4 years or decades. If you do I guarantee that you won’t like the result.

Labels: Andy Ostroy, Congress, energy alternatives, ethanol, huffington post, Nancy Pelosi, nuclear energy, Polispeak, President George Bush, Senator Barack Obama, Senator John McCain, Social Security

On the best day, in the best markets, investing is difficult and stressful. But the current market environment is far from the best of anything. Even so there are a few things we can definitely say about this current cycle. Most notable is that this may well be the year of raw resources, commodities, and the mining and energy companies that find them.

As many of the stockbrokers I have worked with are wont to say,

“You don’t need to be a rocket scientist to figure this out.”

[Something I stopped saying after having said that to a rocket scientist who still disagreed with my analysis of a stock position.]

Energy is a critical issue in every world market right now. Whether it comes from oil, ethanol, coal, geothermal or any other source. Considering the constant demand in the U.S., the increasing demand in China and India, and the growing desire to have cleaner energy (for whatever reason) this is not a short-term issue. Yet oil and energy companies are under political attack. And thus there is an opportunity. If you know where to look.

There are far too many speculating in the commodities markets, particularly oil, right now. The rise in oil is attributed by many to be directly tied to that speculation. Given the current political environment and election I would not be surprised to see legislation enacted to raise the margin requirements in commodity trading up to 50%. Even if it is not raised (or to that level) the mere action of talks occurring in D.C. will hit that market hard. So I suggest another old broker ideal, look where the market isn’t hottest.

Coal. It’s one area that isn’t getting a lot of conversation on cable news channels at this time. It’s a fuel that is available, abundant in the U.S., and with current and future technology cleaner than ever before. It’s also easier to improve technology to make it even more clean, and last I checked no environmentalists were seeking to block its mining to save any owls.

Gold. When economies are shaky, or perceived to be, everyone wants their hands on at least some of this yellow metal. With Lehman Brothers reporting a $6 billion bailout similar to other financials earlier this year, the economy is in question still. While gold has retreated in recent months from its run at the start of the year its way off the lows. And it would take little to spark another run, like maybe a weak dollar. Sound familiar?

The other precious metals. If gold is good, platinum is sweet. And silver is their poor cousin.

Uranium. If we aren’t using oil, and coal hasn’t been looked at, the only immediate answer left is nuclear. Short term it solves many questions, and it’s very clean. As pressure builds for politicians to investigate all energy alternatives nuclear will hit the table again. Add just one or 2 new power plants and there will be a spike in this mined resource on expectation of a growth spurt in the industry not seen since the 70’s.

Now there are other reasons to be in mining stocks for the near, mid and long term. I don’t think most need more though. No one knows which of these mined materials will be the first to run. The political environment hinges on the person elected President. The economic forecast is in shadows currently.

But probability says at least one if not all of these will have their value increase. And the best hedge may be owning the mining stocks as opposed to the particular individual material. Yet another old saying is

“don’t mine the gold, sell the picks and axes”.

The turmoil in the stock market is hardly over. The price of oil may even out. At least till winter hits. But I will guarantee that talk about energy, and therefore mined materials will not end before the Presidential election at it’s soonest. Any rocket scientists want to speak up?

Labels: economic forecast, energy alternatives, ethanol production, Lehman Brothers, mining stocks, nuclear energy, political environment, precious metals, presidential election, rocket scientists