Obama Blows Wind(fall Profits) on Big Oil

Obama is gonna pull a John Kerry and lose this coming election. I can feel it in my bones. I knew not to get too excited about him. It was too good to be true! Very early on in his campaign, I sent an email to his website advising him to bone up on his energy policy because statements I heard him make on the subject were less than impressive. I immediately got an email back asking me to volunteer for the campaign and make a donation. My reply was that I would support him if his energy policy was similar to mine, that there was no larger issue facing the US than the "oil factor", and that I needed to see him go on record. Well, that was months and months ago, yet I still get an email or two every week asking for donations, and I keep sending my energy policy back.

I guess in my heart I knew it would be ignored. Why not? The DOE has ignored it, so has the President and the many members of the House and Senate I have sent it to. My mom has read it and I have gotten a few comments from the SA crowd. But, it must be stupid - Barron's, Business Week, the WSJ - they all passed on printing it. I am probably one of those people who over-estimates his own self worth.

That said, as much as I like a lot of what Obama says, I was really bummed out today when I read he plans to enact windfall profit taxes on big oil. From the Reuter's release:

"I'll make oil companies like Exxon pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills," the Illinois senator said.

He's on his way to a John Kerry loss. I mean, companies "like" Exxon Mobil (XOM)? Does that include Chevron (CVX) and ConocoPhillips (COP)? Hmm....what about Occidental (OXY) or Apache (APA) or...well, I mean, where *exactly* does this stop? Windfall profits taxes on "big oil" is simply a terrible mistake as we head into an era where worldwide oil supply will not keep up with worldwide oil demand! It will lead to LESS oil for Americans when we already face an oil crisis! The Republicans don't have a lock on insanity after all. I feel like Kurt Vonnegut now...a man without a country.

The big US international oil companies are already hurting in terms of places to explore. Venezuela and Russia have nationalized. Brazil is kicking around new legislation to make sure their reserves are booked as they want them to be booked. US foreign policy has been such a disaster and pissed off so many countries that firms like StatOil, Eni, and Total are now getting contracts that Exxon, Conoco, and Chevron used to get. And now Obama wants to tax the hell outta em. Wonderful. Well, the oil guys will simply pull in their E&P budgets, protect their shareholders, and most likely pump less oil. I mean, all three pumped less in the last 4 quarters as compared with the prior 4 quarters, and oil prices doubled in that time!

All that aside, I am sure most of you by now read the Barron's piece over the weekend where the opinion was that all three XOM, COP, and CVX are all undervalued. Like me, the "Goldman Guru" likes COP best because of the nat gas exposure. I keep remembering back to that conference call a few years back when some analyst was pounding COP CEO Jim Mulva about the Burlington Resources deal - "you paid too much!" he implied. Mulva, very calmly, said, "hey, this deal makes sense with nat gas at $5, and we expect it to go higher". Well, it closed at $12.62 today. COP is simply gonna print cash for the next few years. Any of my faithful readers remember a few months ago when COP was trading in the low $70's and I wrote that COP would break $100 this year? It was up $3+ today to $95 and change. I'm sure the Barron's story helped, but I think COP still has room to run another 15-20% before year end. Check out the EPS estimates and the PE for COP! And people were banging the table to invest in Lehman Brothers today? Pah-leeeeeze.

Whoops, I got sidetracked. Back to Obama. Hell, I have lost all my energy to write any more. Sigh. I am very depressed. I thought I had my candidate, but my candidate doesn't know energy. I know energy. When will the US get a true statesman in the White House? Ever again?? Where is John Adams when you need him? Hell, where is Harry Truman? Dead.

Speaking of Truman...he was a man of quick decisions. He studied a problem from all angles, consulted people smarter than himself for their advice, and then took action and made a decision. However, in the book by David McCullough, I remember one decision he really struggled with. Support for a new state for Israel. Their own country. He spent days ruminating about the issue and fell into a big funk. His State Dept. guys were telling him it would come down to oil some day. Truman didn't want to do it. He was tired of Jewish meddling in US foreign policy. Yet, his Jewish friend, with whom he went into business with, was the trump card when decision time came. It's amazing how much happened when Truman was in office...negotiations with Stalin over Germany and WWII, the decision to drop the nuclear bombs on Japan, a state for Israel...alot to ask of a farm-boy from Missouri who never went to college. An amazing book and man. Very interesting to read those passages from that book today.

McCullough was very worthy of the Pulitzer won for such a masterpiece. Up there with "The Prize", although Yergin still won't admit there is a worldwide supply/demand issue. He called peak oil once before during the first energy crisis (which was political, and Yergin didn't understand the difference). Now, that we really have a supply/demand crisis, he's nervous to be wrong twice. Still, they parade him onto CNBC. Thanks god for Boone Pickens. Wish Pickens was a bit younger, I'd like that crusty old SOB in the White House - at least we'd have an energy policy. Damn, I am all over the place with this submission....no alcohol involved. Just depression....sigh.

Obama is gonna blow it! I can't believe it... we have an administration that has run up huge deficits, devalued the US currency big-time, got us into two undeclared wars, tortured, threatened to drop "tactical" nuclear weapons on Iraq, shocked-n-awed us to death, turned the S&P upside down, led a Fed takeover of a publicly traded investment firm, and continues to press for permanent tax cuts for Warren Buffet and Bill Gates! I mean come on...and the Democrats are going to lose. Again. It will be a very bad Kerry re-run. Sad. Very friggin sad. It started with the windfall profits tax policy announcement today. To heck with it - I give up! Time to go fly-fishing!!

Disclosure: I own COP and a fly-rod.

Comments

[Mmarrkk:]

Glad you can see the light. Obama is a complete loser. His diatribe of "hope" and "change" are really just a load of crap. He wants to "change" us alright...change all of us earning a living to people paying higher taxes and paying more for gasoline. While he can give a great speech, there is no "there" there. And what is "there", is so left leaning that he makes Lenin look like Reagan. So far there has not been one policy he has proposed/endorsed that would not move this country closer to socialism. Take money from rich and give it to poor. Tax rich people more just because. Force everyone to get healthcare, whether they want it or not and force them to go through a government to get it. Overregulation everywhere you turn. Hand outs for everyone who votes for him! And now, he wants to cut off funds/profits from the only companies involved in putting gasoline in the tanks of our cars. Yeah, great idea. What next? Windfall profit tax on surgeons?

Fear Obama. Tell all your friends about his voting record in the Senate. List all of the programs he is proposing. Listen to the hate/bigotry his wife spouts. Don't hate him because he is black or has a muslim surname. Don't even hate him because his pastor/mentor of over 20 years is a racists/bigot/crackpot... Hate him for his policies/politics/what he will do this country. Then get out, hold your nose, and vote for McCain. He's not great, but he's better than the alternative.

2008 Jun 11 09:17 AM

[Michael Fit...:]

mm-mmm-mark: well...the reason i liked obama so much to begin with is because he wants to restore some fairness to the tax code which will help fix the US dollar, which is our second biggest problem (energy being the first). that warren buffet and bill gates continue to get tax cuts while the US dollar is in free fall is just stupid and "non-conservative republican" economic bs. which is why i have said repeatedly that bush and his buddies are NOT conservative republicans, they are RADICALS. just look at what has happened to the US dollar and US stock and bond markets under bush and his buddies: a complete disaster all the way around, no matter how you look at it. however, the biggest issue facing America, as i have been campaigning about for 3 years now, is OIL. and, obama's windfall profits tax comments mean to me he doesnt get it. so, now i am hosed - no candidate. for mccain to ditch all his old (correct) ideas and conform to the failed bush policies is just plain ignorant and proves he too has economic blinders on and cannot see how badly the failed bush economic policies have pretty much bankrupted our treasury and our currency and our economy. so, i am like kurt vonnegut - a man without a country. well, i have one, i just don't like where it is headed and fear that within a year or two we will see some major social unrest due to the last 8 years of idiotic economic "management".

2008 Jun 11 10:21 AM

[volvoswede:]

I wonder if you have any further thoughts on Obama vis a vis windfall taxing Big Oil in view of GOP defeating Democrat bill yesterday. I haven't read it but understand it would not penalize new research and new drilling by companies, the main objection of GOP opponents.

2008 Jun 11 03:30 PM

[Michael Fit...:]

User: well, i am not surprised the bill was defeated yesterday. i surely would have voted against it! don't get me wrong, i have no problem taking away the tax breaks that big oil currently receives. what bothers me is, i thought obama "got it". he came out against the electioneering rhetoric of a "gas tax holiday". he's been a bit wishy washy on nuclear, but not dead set against it. my problem is this: washington DC (BOTH parties) and the US media have yet to comprehend what is happening here. even with oil at $135 a barrel, they STILL don't friggin get it. as i have yelled, screamed, and written until my fingers are raw, we need a

**COMPREHENSIVE, WELL-CRAFTED, LONG TERM ENERGY POLICY **

like this one:

thefitzman.blogspot.co...

it is the only, rational, common sense approach that the US can take. yet, it is competely ignored. therefore we will see the following (as i have predicted for the last 3 years):

1) a falling US dollar
2) rising oil and gas prices
3) a US economy on the brink of recession (or worse)
4) increasing inflation and, at this point, the beginning of social unrest

to slap windfall profits on the producers of the one critical commodity that our economy needs most is simply ludicrous. at this point, the US government seems intent on imploding. all because of an oil crisis that is staring them straight between the eyes. i am sure the next "grand plan" of the strategy is to team up with Israel, bomb Iran, see the Straits of Hormuz bottled up, watch oil to go $400/$500 barrel (even if you can get it!) and watch the US revert to an economy based on the garden in the back yard (that is if you can protect it at night from the vandals). pessimist? you bet i am. our government is simply non-functional at this point, and if the states would demand a constitutional convention, i'd be there with bells on.

2008 Jun 11 04:09 PM

[Mmarrkk:]

Before this year, the stock market was on a tear. One could say that this correction is just what we need. The market had gotten too far out in front. I do put some blame on Bush for not reigning in spending. WE spend too much. But I strongly disagree with you on "fairness" for tax code. Quite honestly, those who pay taxes should get tax cuts. And the tax cuts should be in proportion to how much you pay. Buffet and Gates pay a crap load of taxes so they should get big cuts. Our rob from the rich and give to the poor plan just sucks. And that is precisely why I don't like Obama and hope and pray he never ever sees the inside of the White House. If you think now is bad, BoBama will make things much much worse.


On Jun 11 10:21 AM The Fitzman wrote:

> mm-mmm-mark: well...the reason i liked obama so much to begin with
> is because he wants to restore some fairness to the tax code which
> will help fix the US dollar, which is our second biggest problem
> (energy being the first). that warren buffet and bill gates continue
> to get tax cuts while the US dollar is in free fall is just stupid
> and "non-conservative republican" economic bs. which is why i have
> said repeatedly that bush and his buddies are NOT conservative republicans,
> they are RADICALS. just look at what has happened to the US dollar
> and US stock and bond markets under bush and his buddies: a complete
> disaster all the way around, no matter how you look at it. however,
> the biggest issue facing America, as i have been campaigning about
> for 3 years now, is OIL. and, obama's windfall profits tax comments
> mean to me he doesnt get it. so, now i am hosed - no candidate. for
> mccain to ditch all his old (correct) ideas and conform to the failed
> bush policies is just plain ignorant and proves he too has economic
> blinders on and cannot see how badly the failed bush economic policies
> have pretty much bankrupted our treasury and our currency and our
> economy. so, i am like kurt vonnegut - a man without a country. well,
> i have one, i just don't like where it is headed and fear that within
> a year or two we will see some major social unrest due to the last
> 8 years of idiotic economic "management"...

2008 Jun 11 05:43 PM

[Michael Fit...:]

MMMMark: i simply don't understand the logic: let's cut taxes and increase the deficit until the US dollar (and the US stock and bond markets) go to zero. what good does it do to save 5% in taxes if the resulting deficits cause the US dollar to sink 7-8% per year? it's madness. not to mention that in the last 10 years, the S&P is now up what, 2% per year? this fiscal policy is simply not sustainable, is completely against conservative republican principles (well, before the current "republicans" changed everything...). if we want to fix the US dollar and thus the US markets we need to do two things:

1) adopt a comprehensive energy plan
2) balance our budgets

you simply cannot fight two wars and cut taxes. it isn't working, it hasn't worked, and it won't work in the future. welcome to the downfall of the US dollar and get ready for a *substantial* fall in the standard of living in the US.

2008 Jun 12 09:51 AM

[Michael Fit...:]

MMMMark: btw, why someone who has billions of dollars can't afford to pay more taxes is beyond me. why someone like myself has to pay capital gains taxes on a few hundred share transaction while at the same time a hedge fund manager who makes hundreds of millions of dollars get a tax shelter is just plain unfair, ignorant, and, like all past civilizations who skew wealth to the upper 0.01% it is simply not sustainable. we need a flat tax that would cut taxes on those making $200k and less, and increase taxes on those who make $1 million or more a year. once you get to $10 million, increase the rate further, $100 million, further increase, etc. etc. graduated until we balance our books. if we actually got an energy policy, then we would have both twin deficits fixed. then the US dollar would strengthen. then EVERYONE would benefit. then you have a strong middle class and a strong country. then we survive. the road we are on now will guarantee a financial crisis (as if we dont have one already...) in which will precipitate the uber-wealthy jetting off to other countries to live while the US implodes from its own ignorance. oil is going to force our hand. so far, we dont even have a pair of dueces cause we are in complete "oil denial". enough ranting. sorry, it must have been the 2 big cups of coffee.

2008 Jun 12 09:57 AM

[James Cullen:]

Belatedly, I enjoyed this article.

2008 Jun 18 11:19 PM

[Logan1:]

Interesting. Fitzman, please remember, Rome wasn't built in a day. While you may see things clearly from your vantage point, tho's in power may not. Too many times in this country we HAVE to suffer before real reforms happen. Make no mistake, what has been done under bush will have a MAJOR impact on our near future. I do NOT think Obama is against some serious energy reform, but just how many on capitol hill have your plan on the tip of their tounge? I doubt it's really even been fully considered. I do think we are definatly headed for trouble. What you sow is what you reap...even nationally speaking. All of the measures you've outlined (on the other page) require a DRAMATIC rethink on the part of washington, followed by quick and decisive action. When was the last time someone got elected by talking about the cuts in lifestyle required to really strengthen the nation? Not in the modern age. Bush got elected because he was "christian" and because he said he'd cut taxes, and because he wasn't too "intellectual". If obama at this stage starts telling people all that you outlined, I'd actually believe he'd have a much harder time being elected. What I believe about him is that he's an astute enough fellow that if a well reasoned argument is put before him, he'd actually listen. He's full energy plan has yet to be told IMO. There is still room for hope. With McCain, there is none at all. Obama has a LOT of hot issues to address with regarding this union, and while you may feel a realistic energy policy is paramount, soooooo many voters feel differently. They are more interested in if he "knows jesus" or if he's an "angry black man". You'll see the GOP isnt debating the issues, they are attacking his character because so much of time thats what people vote for. The voting public at large is very ill informed and easily distracted. Obama may not have all the pieces of the puzzle correctly identified, but our only hope is to have someone with enough humility and intellengence to reverse course when shown he's moving in the wrong direction. I think he may very well come to your conclutions once they've been fully vetted and proffered to him. He can't and won't be perfect out of the gate, but its the ability to recognize sense WHEN he sees it that I am hopeful about. He has to get elected first tho, and going after
'the bad oil guys" is an easy way to get people on your side vs. telling america he is going to tax all suv's and forceably restrict gas consumption. McCain is soo bad, 1/2 his base doesn't like him. No way he'll win unless Obama meets an untimely demise. THIS is what im most worried about regarding america. We discard our best and brightest and elevate people like bush.

2008 Jun 19 09:02 PM

[AlexS:]

Logan1, nonsense. Are you saying the leading candidate for the Presidency, currently a U.S. Senator, really hasn't thought out what he thinks about energy? We know what he thinks about it. More taxes. No drilling. More taxes. No nuclear. More taxes. He doesn't doubt it. Why should you?

Fitzman, good article. I also own COP and a fly rod.

2008 Jun 23 05:29 PM