Obama Blows Wind(fall Profits) on Big Oil

 |  Includes: COP, CVX, XOM
by: Michael Fitzsimmons

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 (NYSE:XOM)? Does that include Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP)? Hmm....what about Occidental (NYSE:OXY) or Apache (NYSE: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.