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

A friend of mine recently asked me what was a good tech stock to purchase. As the discussion went forward I realized 2 things. One that they had no idea what a tech stock was, and second that tech stocks today encompass more companies than say 20 years ago.

The average person will think of a tech stock as just a computer company. And that is accurate. But it is limited. Right now computers include companies like car companies, oil drillers, wind energy, cell phones, even washers and dryers. So what might be a more accurate view of technology stocks?

The most accurate answer would be that it’s new innovations on technology. It’s not just computers, but how they are used, or how new things are crated and used.

Look at clean and renewable energy companies. There is the development of high density, long charge, rechargeable batteries. Solar energy has new developments in solar cells, and better transfer of electricity. Biomass turns garbage into a fuel source. Not to exclude the potentials still to be learned about oil shale, or ethanol derived from wood and grass.

That’s just one source, and it’s popular. Considering the numerous people that believe in ‘global warming’ (which I do not) and those that wish to clean up the earth, this is a sector that will not be going away. In fact we can be sure that more funding will be funneled into this arena no matter who wins the Presidential election.

[But if Democrats win it can be a real big area. Considering that Speaker Nancy Pelosi is making money from her investments in Clean Energy Fuels Corp., T Boone Pickens' company, you can count on the sector gaining a lot.]

But that is just one area.

Water purification, needed on a global and consumer level, is another concept. Cars are advancing technology as the hybrid cars are now being developed and improved. Pure electric cars are receiving a lot of research money as well. And what about service stations to fix and fuel these cars.

Or what about the engineering and construction companies that build the various plants and components needed. Or the ones that might be building newer, safer, nuclear and coal energy plants.

My point is this. The concept of technology stocks is not limited to just the latest version of modem, or processing chip that a computer maker comes out with. In fact computers need not be involved, or the primary component, of a technology company.

The big thing to keep in mind when buying any technology stock is the following

• Is the technology needed en masse


• Will funding come from private or government sources


• Is the technology building upon an existing product or service, or is it a new innovation that has to develop a market


• Does the technology have applications in other industries beyond the one it was made for


• Is the technology user friendly

Based on those answers you can weed out many different ideas and get a bit closer to what you believe is a good investment for you. Of course other factors are always important to keep in mind. Like the economy, competition, potential profitability, political environment, retail or institutional end use, executive management, size, and proof of concept.

Obviously I like some of the new technology in the energy sector. It covers several of my criteria. But that does not mean this is the only option out there. Do your homework and you may have a pleasant reward over time.

Remember that investing in technology stocks is like any other investment. Proper planning, time and management are critical to a positive return. Looking for a homerun usually winds up in taking on more risk than you really want and often does not provide a reward.

Labels: ethanol, global warming, hybrid cars, oil shale, renewable energy, Solar energy, tech stock

Oil is in the middle of the summer breather, gold has backed off the stellar highs reached in the 1st quarter. Inflation is in the background, and the mortgage housing crisis continues to hinder the financial markets. Well back on July 2nd I mentioned that

“Energy shortages, most notably in South Africa but also in North America and Chile, forced supply down artificially helping to boost prices. But that is a problem that has been in the works of being fixed since the 1st quarter. Once it is done supply will rise to meet the growing demand and be a signal for profit taking.”

It seems I was right. So what might an investor do and look forward to?

Mining stocks continue to hold one of the better risk reward scenarios for a long term outlook, I think. While many sectors of the markets are slowing there is huge potential in the mining sector for reasons most are not discussing now.

Because of the huge run on gold and precious metal prices early in the year, many of the mining companies took the opportunity to horde cash and survey the landscape. Several of these companies are taking the current indecision in the markets to use that cash to acquire some of the competition. Lonmin was recently offered a takeover valued at roughly $2.5 billion. Vale of Brazil is looking for a potential match with $12 billion in its coffers, while BHP Billiton and Rio Tinto are doing merger dances.

But a merger is only one reason why the current lull in metal demands is a buying opportunity in mining stocks. China and India are far from peak of their demand for metals. Both of their economies are in growth phases and require more raw resources.

China is not only using more metal, they require much more energy. Already China has grabbed the excess crude oil that has become available from the slowdown in the United States. Soon they will have increased their need enough to be driving up crude oil prices even if America lessens its demand via domestic drilling or increases alternative fuel sources.

And of course there is the aspect of fuel sources outside of crude oil. The world is looking for options and needs energy until a renewable alternative becomes viable. That means an increase in mining and processing of oil shale, coal, and uranium. While nuclear has its detractors it provides too much energy to be ignored, and is relatively clean. A new process for coal is in talks in America, making its use cleaner and a readily available domestic stopgap for crude oil. And oil shale has a potential that still remains unknown on the large scale.

Each and every one of the reasons above is likely to show their influence before the end of the year. With the political situation in America poised to change energy consumption trends after the Presidential election, mergers creating more efficient (and profitable) mining companies, demand pressure from China and India even a slight increase in crude oil prices (as winter approaches) or a rush to gold and other precious metals as a hedge for inflation and/or weak markets means that mining stocks are well poised to outperform virtually all other sectors by the end of 2008.

Labels: BHP Billiton, China, coal, Crude oil prices, India, Lonmin, mining stocks, nuclear power, oil shale, precious metal, presidential election, Rio Tinto, uranium

Earlier today I wrote about oil shale, and it’s potential to help ease energy needs in the future. I received an email later in the day from a Mr. D.B. [I’m withholding his name since he did not publicly make a comment] pointing me to information found at The Wilderness Society. The specific page I was directed to mentions (with a nice use of bold tags and darkly worded writing) how oil shale is ineffective as a fuel source today, will not affect prices today, and that any new action is inadvisable since oil companies have access to oil shale today.

I never stated that oil shale or anything else will resolve the price of crude oil, or the need of energy in the United States, tomorrow. In fact in the few lines I devoted to a timeline I clearly stated a far future point.

“Now since there is no oil shale market (yet) and given that mining shale is a very different process from drilling for oil, I would imagine that several oil companies will be looking for acquisitions and joint-venture deals with mining companies that have the ability and experience in this field. Schlumberger, Shell, EnCana, Chattanooga Corp, Fushun Mining Group, Tosco Corporation, Petrobras, Viru Keemia Gripp are just a few involved in some aspect or projects with oil shale. I doubt that the number of companies will decrease in the coming years.”

But I will say that not acting today on multiple energy sources simultaneously will only create a bigger problem in the future. It is the inaction and political bickering of past Congresses that has lead to the problems of today. In 1973 America knew that foreign oil was a problem. It was $10 then. Since that time we have decreased our refineries, decreased our drilling, blocked multiple sources of drilling, blocked or hindered multiple pathways for energy research, and cherry picked the worst energy alternatives in the world. Thus oil today is $140, gasoline at $4.07.

I will also dispute the claim that oil shale is unusable as an energy source. It may have difficulties but several nations use it today. They may not be the size of the U.S. but they are creating power via oil shale. Thus near term use is a reality (unless you believe that Estonia has a secret ability to generate most of its power from oil shale). In fact Canada, Turkey, Jordan, and Egypt all have plans to use oil shale to some degree or manner for power generation. Effective use, which the article states is maybe a decade away, is near-term especially as other nations find means to use this resource.

Thus already 2 of the major themes to not START a serious oil shale program are defeated between this post and the last. The big question, which I know little about, is what are companies doing currently.

The article states that a handful of companies haver some land with oil shale reserves. It states that nothing has been done with this land. It does not state whether environmental regulations will allow the mining of shale, or any other material. Just like the oil reserves found of the coasts of America, we know where it is and comnpanies hold rights to explore – but federal and state regulations prevent any action on them. The article completely fails to address that issue, which is a factor that has helped to cause the current environment.

The article wastes no space in stating we should not rush into oil shale, but it gives no space to any alternatives. It is that kind of philosophy that leads to problems that cause a rush to action. Again, I was not advocating oil shale or any single energy source. I advocate (and believe the government needs to mandate) all energy sources. I think we need to require oil shale development, and solar, geothermal, wind, biomass, grass-derived ethanol, nuclear, and coal as well as oil. Developing all of these ensures that America will have power at reasonable prices in 10 years, 20, even 50 years after all oil is gone.

Now I can understand why no alternative was suggested. Wilderness Society has since 1935 sought to protect wild nature. They are like other groups that prevent logging to save spotted owls, and refuse to allow drilling in ANWAR. The friends I grew up with, went to college with, served in the millitary, and currently live around would call these people treehuggers. Not meant in a nice way.

While I respect their love of nature, I am a city-dwelling internet using, motorcycle riding man of the 21st century. I fully understand that to live the lifestyle we all enjoy there are sacrifices that must be made. I also understand that technology and understanding of the environment have improved enough that we can minimize the impact we make to gain the fuels and resources we need. I futher understand that the only way for humanity to cease it’s impact on nature is to give up computers, cell phones, iPods, cars, lights, television, movies, plastics, hamburgers, you get the point.

Mr. D.B. may have many reasons to believe that oil shale is not viable today. And I agree with some. But I am willing to work on it and other ideas so when we need it in 10 or 20 years we will be ready. Their argument would have you light a candle.

But choose for yourself.

Labels: ANWAR, Canada, Congress, energy alternatives, Jordan, oil shale, Turkey, Wilderness Society

As I write this President Bush is expected to discuss offshore oil drilling in America, and the opportunity of Oil Shale mining. In recent years I have heard a lot about oil shale and its mining, but I really didn’t know anything about it. Like most I expect the thought of oil shale made me think of a rock that is filled or comprised of oil. That is not the case.

Oil shale is a fine grain rack filled with kerogen. In heating the oil shale a gas from the kerogen is released which can be used in heating homes and creating power, or the gas can be cooled to create a synthetic petroleum-like oil. The use of that oil is similar to the uses for crude oil, but they are not the same thing.

How much oil shale is there, and is anyone using it? Those are the next questions I had. The answer may well surprise you as it surprised me. There is estimated to be 3 trillion barrels of oil equivalent of oil shale in the world. The United States is one of the major sources of deposits in the world with 1.8 trillion barrels equivalent under Colorado, Wyoming, and Utah. This is in comparison to the 267 billion barrels of oil estimated in Saudi Arabia (as of 2006). And currently first world and emerging nations including Germany, Russia, China, Israel, Brazil, and Estonia all have varying degrees of oil shale industries producing energy and fuel. Who knew.

Now consider this, mining companies - such as BHP Billiton, Anglo American, Kazakhmys, Vedanta Resources, Xstrata – and oil companies have been having a strong year as energy is on the forefront of political and investment minds. With the rise in speculation of crude oil prices, rising gasoline and home heating oil prices, and calls for alternative energy sources oil shale stands to be more actively in the public domain than ever before.

Now since there is no oil shale market (yet) and given that mining shale is a very different process from drilling for oil, I would imagine that several oil companies will be looking for acquisitions and joint-venture deals with mining companies that have the ability and experience in this field. Schlumberger, Shell, EnCana, Chattanooga Corp, Fushun Mining Group, Tosco Corporation, Petrobras, Viru Keemia Gripp are just a few involved in some aspect or projects with oil shale. I doubt that the number of companies will decrease in the coming years.

Opportunity abounds for the investor and individual that seeks it. How you take advantage of this potential is up to you. But I would expect that oil shale will become a greater factor in at least American energy future plans than ever before.

Labels: Anglo American, BHP Billiton, Colorado, Crude oil prices, energy alternatives, Fushun Mining Group, Germany, kerogen, oil shale, Petrobras, Saudi Arabia, Schlumberger, Tosco Corporation, Utah