US produced natural gas can literally save the US economy and usher in an era of economic prosperity reminiscent of the country’s glory days of the now seemingly distant past. This means it can also rescue the US equity markets. The other side of the coin is bleak: continuing US addiction to foreign oil in an era when worldwide oil supply won’t keep pace with worldwide oil demand is a recipe for economic disaster. In addition, the end of US economic prosperity due to its oil dependency will quite likely mean the end of democracy in the US. History is filled with examples of the ties between economic and political well-being.
A country with 5% of the world’s population that uses 25% of the world’s oil and imports anywhere from 60-70% of that oil is in a very precarious situation. Unfortunately, 2008’s $145/barrel oil and $4.50/gallon gasoline has not significantly affected US energy policy, the US media, or the US electorate. Even the financial turmoil suffered by the entire country, the US equity markets, and specifically US automakers haven’t fostered the kind of realistic energy policy debate the country so desperately needs. The US is going bankrupt trying to solve a commodity problem (oil) with financial tomfoolery. The cost of fighting foreign oil wars in a continuation of the pentagon/petroleum relationship that has dominated US foreign policy for decades has not shown a positive return on investment and has caused the US to top a 2008 world survey on a list of “most feared nations”.
These wrong-headed energy and foreign policies are one reason China is now in the cat-bird’s seat flush with foreign reserves (most of it US dollars) in which it can scan the globe and successfully buy up the energy reserves its economy requires. China’s energy deals in Russia, Brazil, Africa and elsewhere were all peaceful and amicable. What a contrast to the US’s militaristic approach. Before sending in your comments, I am a patriotic American and I do love my country. These are exactly the reasons which motivate me to speak out.
I’ve written many Seeking Alpha articles on why natural gas transportation is absolutely critical to the future well being of the US. Some of the more important articles are:
- Is There Enough Natural Gas?
- A Natural Gas Centric Strategic Long-Term Comprehensive Energy Policy
- America Needs a Natural Gas Transportation Infrastructure
- A Natural Gas-Centric Revitalization Program
In these articles, I have presented data and rationalization that our continued addiction to foreign oil will destroy our markets, economy, and democracy for why and how the US needs to adopt a natural gas centric energy policy and what that policy would look like.
I’ve reviewed Robert Hefner’s excellent book “The Grand Energy Transition” and detailed what America’s most knowledgeable natural gas expert believes to be our best way forward. I’ve presented the natural gas/electric hybrid concept car from Toyota (TM) and explained why this vehicle is an example of what US and foreign automakers should be doing with respect to personal transportation solutions and why the US government should support such vehicles and their manufacturers.
Despite valiant efforts by some Seeking Alpha contributors and comments to convince me of my energy policy faults, and that natural gas is not the way forward, I have yet to be convinced by anyone that the US can significantly reduce its foreign oil imports over the next 5 years without adopting natural gas transportation on a massive scale. Likewise, I continue to believe that it is exactly these foreign oil imports which are at the root of declining US markets, power, world influence, and its democracy. As Abraham Lincoln said, I’ll continue to persist with my opinion until someone can convince me otherwise.
All that said, where are we today?
Natural Gas is Abundant and Cheap
Natural gas is today trading at $3.65 per million BTU’s reflecting no simply the economic slowdown and reduced demand, but more importantly robust new supply from US shale plays. There is so much natural gas storage capability is just about maxed out despite a US rig count of 966, which is down over 1000 rigs from the same period in 2008 (Baker Hughes rig count). People in such natural gas enlightened states as Utah and Oklahoma are paying between around $1.05 per GGE natural gas while the rest of us in states that cannot even purchase an NGV and have no CNG refueling options pay 2.5x more for foreign oil derived gasoline. This is truly a sad state of affairs (except for those lucky NGV drivers in Utah, Oklahoma, and elsewhere).
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Environmental Status – Natural Gas is (still) much cleaner than Coal or Oil
Time has not changed the obvious environmental benefits of natural gas:
- 30% less CO2 emissions than foreign oil derived gasoline
- 50% less CO2 emissions than coal burning power plants
- 100% less emissions of toxic particulates of either coal or gasoline
Yet, still the “environmental purists” in the US continue to lump natural gas into the “bad” fossil fuel camp with its much more toxic counterparts coal and oil. Their lack of education, pragmatism, and logic continues to amaze me. Apparently, it is much better to bank on electric cars which aren’t here in volume, won’t be here in volume for decades, and will rely on coal power plants to recharge. This is quite simply idiotic environmental policy. Now, before the comments come flying in, I support electric vehicles. I support Project Better Place. I love the Toyota Prius. But, the Toyota Prius still relies on foreign oil while their Camry natural gas/electric concept vehicles relies on US produced natural gas.
Meanwhile, I have presented data in previous articles that show how banking on electric cars prior to building our adequate wind and solar infrastructure merely increases toxic coal emissions. You would think after the Kingston, TN coal fly-ash environmental disaster, one of the worst if not THE worst environmental catastrophes in US history, we would have started a massive program of replacing coal electric generation with natural gas. This is not happening, and the focus of attention with respect to the Kingston debacle is how the TVA could have allowed something like that to happen. This investigation completely misses the more relevant question: why on Earth aren’t we converting coal burning plants to run on natural gas instead? Natural gas has NO fly-ash or toxic combustion remnants to store, just 50% less CO2.
The Environmental Destruction Agency (EPA), oops, sorry, the Environmental Protection Agency still is not working to tear down the barriers to NGV conversions - a very sad example of a US government agency not doing its job. The only agency worse than the EPA is the SEC.
Sad to say, Americans who supported Obama are making exactly the same mistake as Bush supporters: they are ignoring obvious bad policy initiatives simply because “their man won”. While Obama has made some solar, wind and transmission infrastructure initiatives worthy of support, in truth he has done nothing to significantly reduce foreign oil imports over the next 5 years. He has appointed a Secretary of Energy in Stephen Chu who is “agnostic” about natural gas transportation, basically wasting America’s most abundant, clean, and cheap solution. Chu is incompetent and should be fired.
Obama supports “clean coal” and is spending billions on it when any rational high school student knows there is simply no such thing as clean coal. In foreign policy, Obama has simply traded in Bush’s oil war in Iraq for an oil war in Afghanistan. Let there be no doubt, the war in Afghanistan is not just over opium poppies, as explained in this Seeking Alpha article, it is about Caspian Sea energy reserves. And again similar to Bush, Obama is looking the other way at the financial fraud and there have basically been no persons sent to jail despite the evaporation of over 3 trillion dollars in wealth and a collapse of the US financial system. Obama is supporting and continuing the rich executive bailout plan as well as the Fed’s reflation strategy of printing as many US dollars as possible and continuing the massive deficit spending started under the Bush administration. Let their be no doubt. BOTH political parties are:
- having no rational energy policy to reduce foreign oil imports
- bought off by coal and oil lobbyists
- involved in the weakening of the middle class American citizens (is there a middle class left?)
- making unsound environmental policies
- engaged in deficit spending on an unprecedented level
- winking at corrupt and fraudulent financial executives
- sending US taxpayer money as bonuses to the most wealthy executives in the banking, insurance, and financial services industries
- supporting policies to insure US economic collapse (Yes we Can!)
- support martial law, increased surveillance, and policy state policies
Quite simply put, Obama is just as bad for all Americans as was George Bush – he simply looks better doing it, is much more intelligent, and gives much better speeches. But there is no doubt; it’s still Ivy League politics in charge at the White House. When will Obama be inducted into Skull and Bones? I would have rather wasted my vote on Ron Paul than knowing I supported a continuation of Bush policies. His goal of the US Congress appears to be US collapse such that instituting the S&B’s “new world order” can be more easily achieved if the millions of wealthy Americans no longer have wealth (or gasoline).
Meanwhile, most Americans are completely unaware of Senate bills 773 and 778 sponsored by Senator John Rockefeller (D-WV) and cosponsored by Senators Olympia Snow (R-ME), Evan Bayh (D-IN), and Bill Nelson (D-FL). Soon, as in China, the US government will control when and what we can view on the internet and some say it won’t be long before the government will have access to everyone’s hard drives. Well, the Fitzman is putting his comment right here on Seeking Alpha for you to see – there’s no need to pry into my hard drive. Americans had better wake up and not be seduced by this constant partisan bickering. Pay attention to what is really happening while our government and media try to keep you distracted with trivia.
The US media continues to support every energy policy that won’t reduce foreign oil imports, keeps the US consumer addicted to gasoline (foreign oil), and continues to report irresponsibly on the realities of worldwide oil supply and demand. On the political horizon, there is a vast effort to convince Americans that health care reform is impossible despite the fact the US spends more on health care than any nation on Earth, is ranked 38th the world rankings, and despite the fact that many countries on the planet have very workable health care systems with far fewer major flaws than our own.
While there are some good things happening in wind and solar, biofuels such as ethanol are obviously not the way to go: they use too much water and drive up food costs. I support wind and solar energy, and US energy policy has been botched for so long we’re now forced to build more nuclear plants. However, let there be no mistake, it will at least a decade before wind and solar can recharge a significant number of electric vehicles so as to make a dent in foreign oil supplies.
Meanwhile, we could be converting half of American cars and trucks to run on natural gas today and cut foreign oil imports by 6-7 million barrels a day within 5 years. And, just think of all the NGVs and CNG refueling stations could have been made available for the money the US government spent on “cash for clunkers”. Is it just me, or is it a joke for the US government to spend billions insuring that Americans buy more vehicles that run on foreign oil instead of US produced natural gas? Obama and Chu…what a team.
Has anybody seen those new Exxon Mobil (XOM) commercials about algae investments? Heh heh algae for gosh sakes? Hydrogen fuel cells, algae, what’s next - magic dust? Big oil will use anything to distract Americans so that they continue their gasoline addiction while waiting for the magic bullet of the future – always the future. Meanwhile, Exxon, Conoco (COP), BP, and Chevron (CVX) sit on truly massive reserves of natural gas. So, why are algae more viable than natural gas vehicles which have been around for decades and need no research dollars at all? We can and should start converting cars and trucks to natural gas and manufacturing NGVs and CNG refueling infrastructure immediately.
The Prudhoe Bay producers (XOM, COP, and BP) are even planning on building natural gas pipelines from Alaska to the lower-48. So, why are the CEOs of these companies not supporting Pickens and Hefner and others in their efforts to get the US off of foreign oil and onto US produced natural gas as a bridge to the solar, wind, and hydrogen clean energy future? Aren’t these CEOs American citizens (excepting BP’s CEO) and don’t they care about America’s future? It’s baffling to me. Sure they make more profits on oil, but they are still going to make big oil profits because the transition will take years and years and oil will still be around for decades. That said, if the US suffers economic collapse, what will their stocks trade for on the NYSE? What good is it for these CEOs to have mountains of US dollars if it collapses?
Another effort by US media and investment “experts” is to convince investors that inflation is not and will not be a problem for years to come because employment is down and thus wage inflation will stay down. Poppycock. Did the Weimar Republic have full employment? Zambia? Various Latin American countries? Full employment is not a necessary or sufficient condition for inflation to flourish. Government spending and high commodities costs can accomplish inflation just fine on their own merits.
Oil is back to $70 which would have been considered an economic tragedy just 4 or 5 years ago. Now it’s psychologically “cheap” because it’s half of 2008’s $145/barrel. We’re still on an oil based economic yo-yo, boom and bust, on an every rising oil price trend line that will remain rising for the rest of human history. Oil based inflation will be as common as the wind and the rain. Unless, of course, we get transition transportation off of oil. But for reasons listed in this article, there’s no reason to expect that anytime soon. “No We Can’t”.
So what should American investors do with their savings? Good question. Move to another country is one answer, but which one? What country will be least affected by US economic collapse? This is a serious question and I am soliciting comments. Ironically, after bad-mouthing the oil companies earlier in the article, what choice do we have except to buy XOM, BP, COP and CVX? I would add foreign oil companies StatOil (STO) and Petrobras (PBR) to this list, as well as OXY which is perhaps the most highly leveraged of them all to the price of a barrel of oil. These companies all have nice dividend yields and are making positive net incomes during this downturn despite financial press impressions to the contrary. Also, buy gold bullion. Not paper gold, not ETFs – take possession of some gold and bury it down by the creek or under grandma’s apple tree.
Buy gold, oil, and energy services (offshore deep oil is the best, like RIG) and stay out of everything else. The S&P has done nothing in 12 years (actually, it’s negative when one factors in inflation and the falling US dollar) and I doubt 12 years from now it will be positive from here, assuming the NYSE still exists. That is a risky assumption if we stay addicted to oil over the next 12 years. If that is the case, I sincerely doubt the NYSE will exist in 2015, let alone 2020. Even the oil stocks are risky in that scenario as the “new world order” government will at some point be forced to take over the oil companies in order to fuel and control the police state they are busily designing now. Witness the latest “studies” out of the UK recommending the government get directly involved in energy policy, production, and consumption because the free markets aren’t solving the energy problems likely to be faced in the near future.
Natural Gas Transportation and the “Phill” are Symbols of American Freedom
America’s most competitive advantage in the world today is its vast natural gas reserves and its 2.3 million mile natural gas pipeline grid which connects every major US metropolitan city and 63,000,000 American homes. Most Americans cannot even conceptualize who convenient and cheap it would be to refuel a car or truck in their garage using Fuel Systems Solutions (FSYS) “Phill” home garage natural gas refueling appliance. By the way, anyone see those awesome FSYS earnings announced last week? FSYS is up $2.83 today. Even if the US isn’t embracing natural gas transportation, many other countries are doing so and FSYS is in a prime position to capitalize on this smart trend.
Further more, most Americans don’t understand that the majority of US natural gas is produced by small independent producers. The largest producers (CHK, COP, and BP) produce less than 10% total of US natural gas consumption. What this means is that there is competition, and that the gas line will stay supplied and cannot be as easily controlled as oil. A reindustrialization based on these natural gas fundamentals could reinvigorate the US economy and US people as never before in history by providing a clean, cheap, and domestic resource as a primary transportation solution. The infrastructure built to provide CNG refueling could be done in such as manner as to prepare us for the hydrogen energy based economy of the future.
However, we are not going to get there with “clean coal” advocates Obama and Chu, and we are not going to get there if the American people stop paying attention to what the real goals of the President and Congress are. Further, despite popular American sentiment to the contrary, it matters not which political party the politician calls home – they are both incompetent and dangerous. Only breaking free from foreign oil and relying on domestic energy solution will the US be able to survive economically and democratically.
Disclosures: the author owns COP, PBR, and STO.