How About a Strategic Long-Term Energy Policy Now?

Includes: COP, CVX, MRO, PBR, STO, SU, XOM
by: Michael Fitzsimmons
I’m sitting here at 7pm Monday, February 21, 2011, looking at my bookmarked and much used Bloomberg energy webpage. It’s a great website to quickly see how world events are affecting energy prices. Here’s a snapshot of the Monday's move:
OIL ($/barrel)
Nymex Crude Future
Dated Brent Spot
WTI Cushing Spot *
-0.19% *
Click to enlarge
Refined Products (cents/gallon)
Nymex Heating Oil
Nymex RBOB Gasoline
Click to enlarge
Natural Gas ($/MMBtu)
Nymex Henry Hub Spot *
-1.03% *
Click to enlarge
* WTI Cushing Spot - Not traded on President’s Day
Geopolitical events on the other side of the globe are causing a huge spike in the price Americans pay for their gasoline. Brent spot is up over 5% and heating oil and gasoline are both up nearly 5% as well. And there is my old friend, domestic natural gas at the Henry Hub, trading at the very cheap price of $3.98/MMBtu. How can our elected “leaders” allow this to happen?
Considering the U.S. imports around 12,000,000 BOE of foreign petroleum every day, at a cost of over $1 billion/day, shouldn’t this simple chart be all policymakers would need to think, hey, perhaps we need to get off our foreign oil addiction? Wouldn’t you think our elected officials would think, gee, maybe we should enact a strategic long-term comprehensive energy policy? Just maybe, wouldn’t you think our Secretary of Energy Steven Chu, were he worth his weight in salt, speak up and say, hey fellas! This is a national security issue? Wouldn’t you think our the 5-star generals in charge of the military that is supposed to protect Americans would stand up and say, hey guys! We better fix this!?
Well, let me help them all out as apparently they are incapable of coming up with a solution. Here is an energy policy that could quite easily reduce foreign oil imports by 5,000,000 barrels a day by focusing on natural gas transportation. Natural gas is the only domestic energy source capable of being scaled up to enable such a significant reduction in foreign oil imports. Natural gas is cheap, it’s clean, and it’s OURS.
Meantime, all U.S. investors can do is what I have been suggesting for years now: double down on the fact that worldwide oil supply will have much difficulty keeping up with worldwide demand until the world gets off gasoline powered cars and trucks and transitions to natural gas transportation. This means buy Exxon Mobil (NYSE:XOM), Conoco Philips (NYSE:COP), Marathon Oil (NYSE:MRO), Chevron (NYSE:CVX), Petrobras (NYSE:PBR), StatOil (NYSE:STO), and Suncor (NYSE:SU). The difference in Brent and WTI spot approaching $20/barrel is benefiting Conoco and Marathon in a big way due to their Midwestern refining capabilities, which can use the WTI. They are selling their gasoline in the same marketplace the Eastern refineries are selling the brent based product. Another favorite is Suncor. Long term, it appears the United States will become ever more dependent on Suncor to grow production. It should be a core holding in all portfolios. Gold and silver should also be core holdings. Geopolitical events pushed gold up $17.50/oz and silver $1.25 (3.83%)!

Disclosure: I am long COP, SU, MRO, STO, PBR.