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How time flies! It's been over three years since I published my strategic long-term comprehensive energy policy

in a quest to help Washington solve the nation's biggest (and least talked about) economic problem -- foreign oil imports. The policy underwent a major edit in 2009 after reading Robert Hefner III's seminal book The Grand Energy Transition. This is a must-read for anyone involved in crafting energy policy and earnestly seeking the pragmatic trade-offs necessary in developing a realistic energy policy.

However, it takes more than reading the book. Apparently many in the Obama administration have read the book and yet we still have no comprehensive energy policy today and no initiative of any kind to reduce foreign oil imports.

I don't want to discuss "peak oil," because that phrase often leads to irrelevant debate. What I will discuss, and what I believe has been proved by oil prices and economic activity, are three statements that are much more to the point:

1. Worldwide oil production will have much difficulty keeping up with worldwide oil demand.

Over the past decade, the price of a barrel of oil is up multiples of the decline in he U.S. dollar. This is based on strong demand not only from China, but from India, Southeast Asia, the Middle East, and Russia.

2. This is a crisis for the world's leading oil consumer (the U.S.) which imports 60% of the roughly 20 million barrels it uses everyday.

The United States sends roughly $1 billion out of the country every day to purchase petroleum. It is by far the largest component of the trade deficit.

3. Policy-makers cannot solve this commodity based oil crisis with monetary policy.

One can only solve a commodity crisis by producing more of it, or, finding a substitute. Since producing 20 million barrels a day is out of the rhelm of possiblity over the next say 5 years, we should find a substitute. That substitute is (or at least should be) domestic abundant, clean, and cheap natural gas.

However, even faced with these very simple truths, the Obama administration (like the Bush administration before it) believes the Federal Reserve can solve our oil crisis by printing more money to "pay" for our imported foreign oil. As we have all witnessed, not only does this strategy not work, but it merely increases the debt, strategically weakens our economic foundation, lowers our standard of living and weakens the U.S. dollar - which causes oil prices to go up, which necessitates printing more money -- well, you get the picture.

Meantime, the United States has been blessed with an abundance of natural gas. That said, it's only a blessing if we know what to do with it and we obvious do not. News flash: Natural gas transportation is a no-brainer!

Natural gas is the only domestic resource which can be scaled up to significantly reduce foreign oil imports over the next 5 years. When I say significantly, I mean by 5 million barrels a day! But it takes leadership, vision, integrity, and a good work ethic...apparently none of which have been in abundance in Washington over the last decade. Is it a coincidence that the S&P500 has gone nowhere in the past 10 years? Certainly not.

It appears the U.S. would rather export its natural gas than to power our cars and trucks with it! Even worse, for years Toyota (NYSE:TM) has had a natural gas/electric hybrid vehicle design (think a Prius that runs on natural gas instead of gasoline refined from foreign oil) which is the best architected engine solution to help solve the oil crisis -- yet the cars are nowhere to be found at your local dealer. What a country! You can find a picture of this vehicle on my blog's energy policy. That is probably as close as we'll ever come to seeing such a beautiful design.

Meantime, Honda (NYSE:HMC) announced plans to sell the natural gas Civic nationwide through all dealers. However, it comes at a $5,000 premium over the gasoline version. For that price, the car should come bundled with the Phill home natural gas refueling appliance. Then I would buy one! I can't believe Fuel System's Solutions (NASDAQ:FSYS) hasn't got together with Honda to bundle these two products together as a package for Honda dealers to offer.

As a result, the U.S. economy is held hostage to the price of oil (gasoline). Every time we start to see the economy warm up a bit, oil prices do to and the resulting tax on consumers and businesses cool things off. What we have is persistent unemployment, stagnant growth, higher inflation, moribund equity markets, and Occupy Wall Street. Welcome to the new normal.

And speaking of Occupy Wall Street, Joe Kernen and the other talking heads on CNBC continue to spew sarcastic remarks about OWS as "commies against capitalism" or some such. Like his famous dreams for oil prices -- "two barrels for $40" (as I kidded him, you'll see two barrels for $400 first), this is just more dangerous thinking.

But what can you expect from the crew that still idolizes former GE CEO Welch, the man who almost single-handedly destroyed that American icon. Senator Corzine was a another frequent favorite of CNBC, and they've even had Michael Milken on the show post his conviction. I have no doubt Bernie Madoff will be on the show one day and will be hailed as the man who got café lattes available for all inmates.

But I digress. The OWS gang is not against capitalism; it is against what has been so blatantly going on the last 10 years or so: the U.S. government shoveling money (printing it first) to the already wealthiest individuals and corporations in the country as a reward for bringing on the economic crisis that we find ourselves in today! This is not capitalism -- it is the definition of fascism. This SA article is coming true before my eyes. However, eyes are getting pepper-sprayed, tents are being torn down and thrown in the Dumpster, and those in power don't seem to think there is anything to worry about from the OWS crowd. And that makes me worry even more about the future of my country.

So, given such a happy outlook, what are American investors to do? Well, the new normal is apparently that the stock market no longer takes its cue from earnings and company fundamentals (ahhh, the good ole days), but instead is jerked hither and yond by the latest mumblings out of the EU or the Federal Reserve or some other U.S. bureaucrat.

At the end of the day, an investor must own gold, silver and oil. You can play the precious metals via the GLD and SLV ETFs, or buying the coins. For oil, I have become a big fan of small to medium sized companies in the Bakken play - GeoResources Inc. (NASDAQ:GEOI), Whiting Petroleum (NYSE:WLL), Hess Corp (NYSE:HES), and for a nice dividend play, StatOil (NYSE:STO), via its buyout of Brigham Exploration (BEXP).

As time marches on and there is still no comprehensive energy policy in the U.S. (and that seems a certainty), the Federal Reserve will be forced to print many more dollars, and ironically this will pump up the stock market so you must participate to keep inflation from getting the best of you.

It's a game of musical chairs, and you best not be the one caught standing when the music stops. It will stop. Best of luck to you.

Disclosure: I am long GEOI, WLL, STO, HES.

Source: The U.S. Economy, Market Are Yo-Yoing On Oil