Fishing for an Answer: Energy, Energy, Energy

The markets were so lousy in late June that I decided to take off for a few weeks of fly-fishing in Colorado. Alas, this year the rivers are still (it is already the 4th of July) blown out because of the huge winter snowpack. For me, this means fishing the high country lakes and streams. For a dry-fly fisherman like myself, this isn't an optimal situation. Regardless, Salida, CO always has a nice July 4th celebration and the brew fest Saturday is always a good time. So, life is good. Then, I made it back to civilization (and an internet connection) after a few weeks of stumbling around in the wilderness looking for hefty trout. I almost didn't want to check the markets. Then I thought, hey, maybe you were wrong and oil has come down. Wrong. New highs have been made in oil and the equity markets are selling off (again). Gee, what a surprise - NOT!

One thing camping and fishing in the wilderness does to a person is sharpen your senses. Your sense of smell and your awareness of your environment are heightened. You become keenly tuned in to sights and sounds. Perhaps this is simply a natural human reaction to being in an environment where lack of attention to detail could leave one in a compromising or potentially threatening situation. This is especially true if alone, which I am a majority of the time.

Likewise, the US individual investor finds him or herself in a wilderness environment - hostile and very dangerous for those not paying attention.  Most investment advisors are no help as they are still preaching broad diversification. I have already written on Seeking Alpha why diversification will be disastrous in the years to come and why investors should stay OUT of the S&P500 and US bonds. Hopefully many of most of you took my advice and got out of these investments. Likewise, the crew at CNBC are no help at all as they still back the Bush administration's insane economic and foreign policies and are in 'oil denial'. Yup, you're all alone in the investment wilderness...but, at least you have The Fitzman. I am here for you.

I have written many times on Seeking Alpha on why oil is, and will continue to be, the main investment consideration for decades to come. After being away from the markets for a couple weeks, with my heightened awareness for danger and attention to detail, I am more convinced than ever that I am correct about oil and the consequences to a US economy which imports a majority of its energy. OIl has gone up another $6 a barrel in the last couple weeks. The US and Israel have the war machine's propaganda department busy getting ready for the strike on Iran. Ludicrous as it sounds being there are still two unconstitutional (and un-won....) wars being fought at present, I think they'll do it. Will Bush and Cheney feel the need to do so before their term expires? What will be the consequences of a strike on Iran?

Currently, we have oil at $144/barrel and if ya think about it, we don't even have any real 'outages' other than the Nigerian shut-ins which have been par for the course the last few years. What if the Straits of Hormuz were shut down for a few days, weeks, or months? What would the price of oil do if Israel or the US bombed Iran?

One thing is crystal clear to me: oil, natural gas, and energy in general are the only investments that make sense to me these days. Strike that - add gold, commodities, and precious metals. But ball fans, that's it. Period. Get out of everything else. Do not diversify. Batten the hatches. It's gonna get much worse before it gets better. Why? I will tell you.

The *only* solution to the oil realities of today and for the foreseeable future, is a comprehensive long-term US energy policy.

As my faithful readers know, this energy policy of mine has been a work-in-progress. The latest additions have been for a 4-day workweek and to strengthen the US dollar (not by the rhetoric of the Fed chairman, but by deeds such as balancing the budget and axing Bush's insane tax policy). Yet, as I come back from a couple weeks in the woods, STILL there is no talk of such an energy policy. All I see is more discussion of windfall profits taxes and of course the 'big picture' guys like Bush and Cheney wanting to bomb another country to get access to the oil. In the meantime....oil is up to $144...and the US markets are heading down in a big way. The US dollar remains under pressure as 'old Europe' and other emerging country investors have figured out that the US is just all rhetoric when it comes to financial discipline. The Fed is hoping to print our way out of our oil driven financial deficit. Each time the price of a barrel goes up a dollar, Ben just rings up the printer and tells him to ship another batch of hundreds out the loading dock.

All of these things are to be expected. I recently submitted an op-ed to the WSJ about the energy policy I have developed. I explained the reasons why failure to enact such a policy will have dire consequences to the US economy, the US dollar, and US investors and why subsequently their subsciption numbers will go down. Nevertheless, they balked at publishing my energy policy and I am sure did not even read it. I got the automated email response back thanking me for my submission but sorry, we'll pass. Hey, no problem! It's your jobs that will be in jeopardy when the US economy and markets tank due to the price of oil. I was doing you a favor! But, you stick with your right-wing policy editorials and support of Bush's economic policies if it makes you feel better. I mean, who can argue with the stock market returns and strength of the US dollar during the Bush administration? What a brilliant success story! Yup, you guys at the Wall Street Journal stick with the winning strategy. Thank goodness for Seeking Alpha.

But I digress. As I was saying, all these issues and the politicians responses are to be expected. What I did not expect was to see the oil and energy stocks perform so lackadasically. What is up with Exxon (XOM), ConocoPhillips (COP), Chevron (CVX), Statoil Hydro (STO), Schlumberger (SLB) and all the rest? These stocks should be at least 25% higher than current levels. Are these stocks going to go down if Bush or the Israelis bomb Iran??! Seriously, what is going on here? COP is expected to earn close to $12/share this year and it is trading at $91 and change!? COP should be trading at a minimum of $125, and, I believe the multiples for oil and natural gas companies should be *expanding* not contracting! Put a PE of say 15 on COP, and you have a stock that should trade between $150 and $200 a share over the next 12 months. In other words, the current energy sell-off has been waaaay over done. Buy COP. Buy XOM. Buy CVX, SLB, STO, Nabors Industries (NBR), Petrobas (PBR), Total (TOT) and United States Oil Fund (USO). Buy natural gas stocks. Simply put: BUY ENERGY. If you don't like stocks or ETFs, buy Vanguard Energy [VGENX] or any  of my three favorite Fidelity Select Funds (Energy, Energy Services, and Natural Gas - FSENX, FSESX, and FSNGX respectively).

If you don't like energy (please see your therapist), then at least buy gold, precious metals, corn, and wheat. Buy DBC - the commodities ETF. Buy real assets. Your US dollar is under attack by policies which foster inflation and further US currency weakness.

I keep fishing for trout and for reasons why such obvious necessities, such as enacting a comprehensive long-term energy policy, seem to be so elusive. Many times in life, things just don't make sense, no matter how hard one tries to figure them out. So, just go with the flow. The flow these days is war over oil. People in power seem to have quite simply lost their minds and have the interests of the American middle class well down their 'to-do list'. For those of you who have money to invest - do so wisely or you'll lose it. It's an investment wilderness out there.

Meanwhile, just to show you that beautiful things still do exist in the world today, here is a picture of a native Colorado cutthroat from Trappers Lake. Until next time - good luck with your investments!

Disclosures: The author owns all of the suggested investments listed above. He did, however, release the fish back to Trappers Lake.

Comments

[petersterling]

I love this story. Its right on the money.

I believe its Better to buy the smaller expanding explorers like Chesapeake etc., as everyone expects the majors to get clobbered with windfall taxes and lower resource access rules.



There is an extremely dangerous game being played by the White House, Congress, and certain activist organizations that is placing the economy and the security of America at great risk. As a matter of national security and to give a significant boost to the American economy, it makes no sense to not assure and achieve hydrocarbons energy independence.




Dr. Roy Cordato from the conservative think tank John Locke Foundation said. "This is a government driven scarcity," Dr. Cordato added. "It's driven by laws that has kept the United States off the exploration market."




We need a "Manhattan Project" of energy development. We're crazy not to be using our own resources. Much has changed since the 1982 offshore drilling moratorium was enacted. Drilling technology has advanced over the past quarter-century. Oil companies can drill more efficiently in deeper water with significantly less risk to the environment. "Compared to worldwide tanker spill rates, outer continental shelf operations are more than five times safer,'' according to the Department of Interior's Minerals Management Service. Domestic drilling would also create a huge economic boost to America.





The plan to fix America's energy crisis and indeed the entire economy is here;

www.strategicnine.com/...




Its simple to get new American energy supplies quickly, Appeal to Corporate Greed: If oil companies are given enough financial incentives, they will move much faster than anyone believes and could find and start producing new oil and gas within 2-3 years, then ramp quickly up to produce enough energy to completely replace oil imports within 10-12 years.

Of course, this would require "people" in Washington capable of conscious thought, not "monkeys". their mentality scraping its knuckles on the jungle floor.

[Whisper OnThe Wind]

I prefer the oil and natural gas trusts (Canadian - with the foreign tax - and American). The dividends I'm stacking up are more than enough to cover any extra costs I'm expending for fuel for my Toyota. And until they stop, I'll keep going. I started with financials, which did me well for the last several years, until 2007, but by switching much of my funds to investments that are paying ME, I'm coming out ahead.

[john s.gordon]

colorado shale might be part of the answer in the future but it takes an awful lot of water to make a barrel of shale oil & you have to buy up some rancher's water rights first. shale was a hot item in 1927 but then east texas came in. there has been no further development of the various retorting technologies for the last 80 yrs. in the meantime we always have syncrude by 2-stage hydroliquefaction of illinois/west kentucky high-volatile bituminous coal if somebody wants to get cracking on that.
> jack

[jjason]

The busting of the commodity bubble is on the horizon. Congress will fix the loophole in the Commodity Futures Trading Act.

Margin requirements for commodity traders/investors/spec... will go to 50% and prices for all commodities will drop.

If the bill to outlaw the monopoly called OPEC passes, maybe other governments will notice. Maybe there will be a World Court trial of the countries that are involved in price fixing. Price fixing in the US is illegal.

$140.00 for a barrel of oil is making some people, governments and businesses wealthy...at the expense of everyone else.

Doesn't it piss you off?

Go to:

www.star-telegram.com/...

to learn more about this problem.

[BrianPursley]

Everything you know about oil is wrong: oilismastery.blogspot....

[john s.gordon]

we hope that congress will fix the loophole. it won't happen until we have 61 senators of the democrat/independent persuasion.
> jack

[Shaggieman]

Wait for crude oil to drop before investing. The oil stocks are decoupling from the price of crude and are dropping with the rest of the S&P stocks as folks realize oil is raising way beyond what the economy can support.

Fitz is contradicting himself by cheering for a tax increase and touting crude oil and commodities stocks since the tax increase will send everyone scrambling for the last of the 15% capital gains by years end.

[User 187267]

If you think it's bad now, just wait till the Democrates get done with it.

[fireball]

in the last few months i have been moving into oil and alternative energies. i find this articke reassuring. i do not believe that there will be much that is helpful coming from the u.s. gov. i do not want them to make war on high oil. the war on drugs and the war on poverty come to mind. if they start to try to help god only knows how high oil will go. looking in the past i see a long list of peas from the same pod. i believe the only difference between the two major parties is the lies they tell their constituants. in another post i said the only pres of this century that i liked was jfk. that was the jfk that emerged from the cuban missle crises. i also liked reagan before the assasination attempt. the names and faces change but the handlers behind the scenes remain the same. there is no hope for gov. to do the the right thing for u.s. citizens. all we will get from there are more lies to appease. the financial incentives in the private enterprise are probably our best chance for improvement. looking at the job the federalis have done with education,infrastructu... troops are all over the world commiting illegal u.n. police actions. u.s. troops are only supposed to fight to protect this country),securing our borders......their meddling in education is now reaching fruition. do you like the results? the other three areas are actually things they are supposed to keep secure. ha ha. we have been at war with korea for over half a century. how long will we be at war with iraq? i am all for making war to protect this country. if we fight to win and end it. so the only relief i see is through the innovation of the private sector. if you think the results of obama will be any different i have some financial stocks (not really) i want to sell you. no doubt obama will soothe you with different lies. so i am wondering about gbrc and their microwave technology. what i can find looks good but i would like to know more. i have bought in in a small way as a speculation but am wondering about a much larger position as a long term investment. also does anyone have info on rtk or qtww?

[Ronmac]

Good ole Brian Pursley and his abiotic oil theory...All I can say is abilotic or from biologic sources...you had better be able to produce it at plus 120 million barrels per day to satisfy coming demand. That means lots of wells drilled with lots of drilling rigs with lots of steel etc.
Until I see production rates significantly above where we are today...we could be (as you contend) floating on a sea of oil...but it won't matter.

[David Lentz]

I see no hope that the Enron Loophole will be closed until we have a huge turnover in incumbents (Republican AND Democrat) in a voter uproar about it.

The Senate and House are simply more motivated by lobbyists and their torrent of money than they are about the fate of the nation.

Unfortunately, the typical voter is so ignorant and disconnected from reality that a far more likely thing is another oil-related invasion and occupation, driving the price of oil well past 200.

[The FItzman]

welp sportsfans, i am back in the SA saddle, and again thank you for the comments. it's a two-way street for me, sooo:

psterling: thx for your comments. yup, we need a Manhattan project, but if you look at my energy policy, alot of it is just common sense and much easier than splitting the atom.

whisper: yup, i like the trusts too, and have a lil bit of Permian Basin Trust (PBT) and Hugoton Royalty Trust (HGT) in my IRA for the tax breaks on the dividends. i usually mention the majors because i get more readers that way. plus, i really do think COP is waaaay undervalued and i own it. regardless, what are your favorite canadian trusts? i keep forgetting to look into those.

johnS - nice pun (get cracking).

jjason: your response insinuates that the price of oil is all speculative in nature. i obviously disagree and feel we have hit a worldwide oil supply/demand balance that will be the dominant worldwide economic theme for decades to come.

purseley: you've been telling me everything i know about oil is wrong since it was what, $90/barrel? it's $145 now. your continued statements that oil is plentiful and in abundance is quite irrelevant considering the price of it, the fact that huge caterpillar trackers are digging up tar sands, and the oil majors are drilling through miles of deep water and then miles more of sand and shale to produce oil. seems like if i was as ignorant as you believe i am, the price of oil would be moving down, GM will still be building Hummers, and the S&P500 would be reaching new highs. yet, everything i said would happen has: oil is hitting new highs daily, the American economy and US dollar are tanking, and the S&P is selling off in a big way. yet, as you say, everything i know about oil is wrong. interesting. i keep waiting for you to be right...how long will it take?

shaggieman: i believe oil stocks are selling off to scare people out of them. it happened in early 2007, then they went on to make 35%. it happened in 2006 and also made over 30%. the market always does what it needs to to insure the fewest number of investors make money. i don't believe i am contradicting myself. you see, i am a patriot, a real patriot, and i care about the future of the US. oil is the biggest threat to the US. so, my energy policy deals with it head on. just because oil or gassed is taxed at a higher rate doesn't mean energy companies are gonna make oodles of net income. oil is indespensible to the US and world economy. it doesn't do ANY good at all to have a low capital gains tax rate if the tax/spend policies cause the US dollar to drop 7-8% per year, which is what has happened under Bush's idiotic financial policies. we have the US dollar falling, inflation rising, so the Republican's solution is to give Buffet, Gates, and the multi=millionaire hedge fund managers tax breaks and raise the Federal budget deficit?? this is basic economics 101 stupidity...and you are seeing the results in the falling value of the US dollar and US equity markets. i can't understand why Republicans don't figure out why this is weakening America in a big way. Oh, I forgot...for the upper 0.001% of richest Americans, it is working out great. they have their summer homes in Europe where the currency is strong....

User: i keep hearing how bad the Democrats will make things. Bush and the Republicans have a great record: a US dollar down over 50% since he took office, oil has gone up 8x, the economy is in a recession, the US treasury has been raped, the twin deficits are at record highs, and the size of the US government has grown to 30% of GDP, and we have two unconstitutional wars going on. how on earth could a monkey without a brain do any WORSE? oh, i forgot to mention that inflation is raging and the S&P is now negative in the 8 years that bush has been in office. if you take into account the US dollars drop and inflation, you have lost money in the "market" bigtime. nice job by "mr mba president". "republican" policy it has been a complete and utter disaster. i should know, i am a REAL republican - one that believes in financial discipline, balanced budgets, small government, and REAL freedom. this administration has delivered none of those.

fireball: i agree with much you have to say about government incompetence. on the other hand, i believe the energy crisis and challenges confronting the US are so large that the government will have to get involved. however, if you look at my energy policy, there is not alot of rocket science in there. pretty straight forward common sense stuff. i have no info on the subjects you inquired about.

ronmac: yup, there are some constants in the universe, and pursley's belief that oil is plentiful and cheap seems to be one of them :)

[The FItzman]

lentz: yup, if israel or the US strikes at iran, you'll see oil at $200 overnight (or higher) and gasoline at $10/gallon. if iran is successful at closing up the straits of hormuz for a few weeks or months, these numbers will look like bargains. that is one reason i cannot understand why a company like COP with alot of domestic supply sources is trading at below a market multiple. it makes no sense at all, even considering windfall profits taxes which i don't believe will have the impact that is being priced into stocks like COP, XOM, and CVX. if iran is hit, these stocks will bounce. bigtime.

[The FItzman]

i either didnt attach the trout picture, or SA decided not to publish it (can't blame em). anyhow, it can be seen here:

bp2.blogger.com/_j_4lw...

[optionsgirl]

Iran can't keep the straits of h. closed. Neither is Israel and US looking to attack. You can be sure if they were, the public wouldn't know about it. If you think the Iranians aren't enriching their uranium, than why are they going nuclear? Is it because we are at peak oil, or beyond? Their reserves are declining, and they subsidize oil for their own people...
Perhaps it is because OPEC lies about their reserves too, and there is much less than they are admitting? And Chavez doesn't have light crude, that is heavy and sour...

[The FItzman]

optionsgirl: israel and the US are not looking to attack?? have you not been reading the papers and getting a huge sense of deja-vu wrt iraq? the public wouldn't know about it? did we not know about iraq? get real girl.

i never said i didn't think the iranians weren't enriching. hell, if i was iran, and i had US troops on both sides of me (afghan, iraq), and i saw what happened in iraq, you can be damn sure i'd be wanting to protect my country in any way possible as well. why are they going nuclear? simple economics and security. the more energy they can generate with nuclear, the more nat gas they can sell abroad and make money.

what makes you so sure iran cannot keep the straights closed? i have read reports that say one huge oil tanker sunk in the middle would disrupt oil shipping bigtime. what if they are able to sink 2 or 3 huge oil tankers? besides the environmental disaster, how is the US or israel gonna clear the tankers out of the straights while under fire? i suppose the air force could just lay waste to southern iran...still, with what we have seen in iraq to date, i wouldn't be surprised if iran has not planned for this event for years now. for a country that discovered chess, i wouldnt bet against them having something up their sleave. regardless, wouldn't you agree a strike would have an immediate & profound affect on the oil markets?

[Shaggieman]

Fitz that's a great looking fish and I do agree with your tax increase ideas and about keeping America strong. Unfortunitly, the barn doors may be closing after all the horses have left. Gates and Buffet will have have moved their fortunes offshore, with the help of the charity, without paying their share of taxes and the whole systems seems destine to come crashing down on the middle class left holding the $9 Trillion bill.

If the 15% capital gains ends this year won't that cause a sell off of even oil stocks before years end?

[BrianPursley]

To Fitz: In response to "you've been telling me everything i know about oil is wrong since it was what, $90/barrel? it's $145 now."

Well not everything. Many of us have got the commodity price right....so far. It only costs Petrobras $8.20 a barrel to exploit Tupi: www.reuters.com/articl...

When America finally starts drilling offshore as we did yesterday in Florida, things could change. We'll see.

"your continued statements that oil is plentiful and in abundance is quite irrelevant considering the price of it"

Why is that?

"the fact that huge caterpillar trackers are digging up tar sands, and the oil majors are drilling through miles of deep water and then miles more of sand and shale to produce oil."

All of which points to oil's deep abiotic origin.

"seems like if i was as ignorant as you believe i am, the price of oil would be moving down"

Why is that? Why does abiotic petroleum mean that markets can't go up temporarily or even act irrationallly?

"GM will still be building Hummers, and the S&P500 would be reaching new highs. yet, everything i said would happen has: oil is hitting new highs daily, the American economy and US dollar are tanking, and the S&P is selling off in a big way."

None of that has anything to do with geology.

"yet, as you say, everything i know about oil is wrong. interesting. i keep waiting for you to be right...how long will it take?"

Who says the commodity price has to go down for petroleum to have aboitic origins. Petroleum is abiotic in origin and the commodity price is high due to political factors.

[oldtrdr]

Good article, but maybe somebody can help me out here, vis a vis tightening margins, etc., to curb "speculation"... in oil? I can't help but think that even if such steps are, in fact, inplemented, the big players (hedgies, pension funds, sovereign wealth funds, etc), will simply move their activities to other "dark" exchanges, leaving the little investors attempting to hedge their personal exposure to higher energy prices to suffer from these trading "restrictions&quo...

Any thoughts on this?

jan

[paulk8756]

Whether intentional or not, all this "scare talk" about bombing Iran only serves to drive oil prices ever higher. Why would we want to invade Iran for their oil...? We can BUY IT any day we want for increasingly worthless dollars!

[galewhitaker]

Dear Mike - I know a reason not to invest in oil and gas. When the world falls into a serious recession oil will be a whole lot cheaper.

For you guys that want to drill, drill, drill, don't you realize that when the American owned oil companies pump crude out of the ground it dosen't belong to America or Americans. They will sell it to the highest bidder worldwide which will probably be some refinery in Japan, not in the US. There will not be enough to affect the global oil market so it will have zero effect on gasoline prices. Did you know that most of the oil from the North Slope is sold to Japan, not America?

[John Egan]

"Congress will fix the loophole in the Commodity Futures Trading Act." - Congress can't seem to fix much of anything. They can't fix Medicare, Social Security, the wars in Iraq or Afghanistan, inflation, the subprime issue...

And when they do **fix** something, it always seems to have a defect... Think of the AMT which was not indexed to inflation. Or Social Security which was funded on air... Consider their present review of the Credit Card industry... Didn't they **fix** that several years ago...

And.. When was the last time that our administration really provided any programs supported by the public... Is there some real reason why we do not have a popular vote for President, rather than an electoral college? This issue has been up in front of Congress several times with no results. Do we as Americans really want to have the Telecoms furnishing any and all personal information to the FBI etc...What about illegal immigration???

Personally, I think I'd rather have them all head off to Crawford. TX and help "W" with his yard work.

I think it's time for a Federal level Initiative process as we have here in California. If the government can't do it, we the people should.

Thx jegan

[paultaut]

There is plenty of Oil, unfortunately the refineries to make it usable are in short supply.

The EPA and Environmentalists have gone out their way to make sure that Regs and Lawsuits prevent new refineries wherever they are attempted.

The Oil Companies spent Billions to acquire worthless leases. What good is a lease when before you can begin to drill, you are tied up in the Courts for years.

Frankly, I would sue the Government for Selling me something they knew the EPA would block.

Iran exports predominantly because they have no refining capacity for the garbage they produce. It goes where it can be refined or sits in tankers waiting for refining capacity for that grade to open up. It may as well sit underground.

We do not want the oil they have.

[Shaggieman]

paultaut - I am thinking the Iranians have the tankers sitting there to block the straits with if necessary. They can maneuver them into position and sink them and then light the oil up. It will make one holy mess of the gulf as the Iranians are shrude opponents and should not be taken lightly. They invented the game of chess.

[The FItzman]

shaggie: yes, i do think the end of 15% cap gains will cause a selloff, and that is part of what you are seeing now in the markets.
that said, i keep going back to my US dollar issue. what good does it do to have all these nice tax cuts when my dollar has gone down 50%? it's gotta lead to US inflation, a still weaker US dollar, and a lowering of Americans standard of living. as i have said before, if devaluing the currency was a good thing to do, Weimar Germany would be running the world today. but alas, they are out of business...

pursley: your first comment to my article was "everything you know about oil is wrong". your very last comment was "the price (of oil) is high because of political reasons." you're wrong on the first, and partly wrong on the second. i'm not arguing your abiotic ideology, what i am arguing is that you insinuate because oil is abiotic that this fact alone means it is plentiful and abundant and cheap. what i am saying is that the reality of oil today simply doesn't back your opinion. you keep pointing to brazil and other new finds, but you don't seem to understand current depletion rates of existing fields. further, if you don't think GM cancelling Hummer production doesn't have something to do with oil (geology), you should reconsider. i suggest you get off the abiotic horse you are riding, and just look at worldwide production (supply) numbers versus worldwide demand. who gives a damn if oil is "abiotic", dinosauric, or shoots out of a mule's ass? the issue is simply worldwide deman versus worldwide supply, and that is the central problem going forward. billions of indians will be trading in their bicycles for automobiles at the same time that supply wont keep up with demand. period. you seem to argue this basic fact with me, yet the price of oil keeps going up, we keep getting into oil wars, and all this abundant oil you seem to think is available just doesn't seem to bring the price down. why is that? are you blaming it all on the "evil speculators"?


studio: thx, and i believe you are correct. nothing they can or will do in the trading pits will stop oil's price rise. oil futures contracts are being traded on supply/demand fundamentals plus a war premium due to the fear of yet another US oil grab.

paulk: talk to the bush PR folks about the scare talk. israel too. i don't originate it, i just ask - isn't this the same kinda stuff we heard before iraq? we don't want iranian energy? pah-leeeze paul. we would love to get our oil majors into iran (btw, just as they are about to sign contracts for iraqi oil production ... heh heh heh) and pump up their ailing infrastructure and double production. but, the jewel of iran is their natural gas and their ability to supply china and india with it. you don't think bush and cheney would love to get their hands on that? well, i disagree. the bigger question is this: how long will russia and china stand by and watch the US plunder the middle east's energy assets? THAT is the question going forward...

gale: i've heard that reason before, but i don't agree. here's why: even now, US gasoline (oil) demand is falling, yet all the slack is quickly picked up by india and china. now, if the whole world goes into a deep dark recession, i agree oil will drop. that said, as soon as oil becomes cheap again, the economies will begin to grow again and the price will rise. long term, the only threat to continued oil price appreciation, in my opinion is:
1) a replacement for the gasoline powered internal combustion engine in all respects (range, refueling, etc.)
2) comprehensive world-wide energy policies taking advantage of 1) above.
we're so far from that reality that, like i say, i can't find reasons to invest in anything but energy. i think we're hosed for at least a decade or two.

as for drilling a couple things here:
1) it is much more environmentally friendly than it used to be. no major spills or leaks during katrina & rita. that is amazing!
2) we are sending out $800 billion a year out of the country on our oil imports and this is a major reason for dollar weakness (the other of course being the spend crazy republican led congress). we must begin to cobble down this outflow of dollars and secure our own energy. we'll never be self-sufficient, but jeez, 65%?? danger will robinson...danger....

egan: funny comment on yard work. as maureen dowd said in her book, there is a big difference between texans who HAVE to clear brush and those that do it for fun.

paultaut: the reason you are not seeing more refineries being built, in my opinion are two-fold:
1) margins will be tighter in the future as the political backlash against pump prices will be embarassing to the oil companies
2) why build more refineries if there is serious doubt as to where the oil will come from to push through them? as of last week, the refinery utilization numbers were under 90%. this is the time of year where they could be in the upper 90's if there was a need. there isn't.

now, it may be true that iranian oil isn't the most desirable. but don't let this fool you into thinking western know-how couldn't go into iran and make serious moula off iranian hydrocarbons. again, i disagree with those of you who think we don't want iranian energy. i think the bush/cheney boys are absolutely salivating over it. what more could they want than the nuclear excuse to get it??

[The FItzman]

shaggie: your tax question deserved a more thorough answer, and i have thought about this alot. why is it that the cap gains tax rate has to be the same regardless of income? in other words, wouldn't it make sense to have me pay a 15% cap gains tax if i sold some COP (since i am middle income and out of a job) and have a hedge fund manager who records a $225 million dollar cap gain pay say 25%? i mean, he can afford it right? we balance our budget, we strengthen the dollar, and the hedge fund manager will actually be better off in the long run because his country and currency are strong. a graduated capital gains tax based on income and/or size of the capital gain itself makes alot of sense to me. common sense.

[john s.gordon]

ref. MBA president (installed on a 5/4 vote by the ronald reagan supreme court) : does anyone know how much $ were lost by the stockholders of harken energy while george dubya was nominally a member of the board of directors but was actually off in alabama political-campaigning for one of his buddies.?
> jack

[BrianPursley]

Fitz: In response to "the issue is simply worldwide deman versus worldwide supply, and that is the central problem going forward. billions of indians will be trading in their bicycles for automobiles at the same time that supply wont keep up with demand. period. you seem to argue this basic fact with me, yet the price of oil keeps going up, we keep getting into oil wars, and all this abundant oil you seem to think is available just doesn't seem to bring the price down. why is that? are you blaming it all on the 'evil speculators'?"

I agree with what you say about supply and demand. I do not blame specualtors: www.bloomberg.com/apps...

I blame Congress and the biogenic "fossil fuel" cult. Supply is low because of Congress and the biogenic fossil fuel cult. Drilling is currently illegal on over 10,000 miles of US coastline. And America hasn't built a new refinery since the 1970s.

Hydrocarbons are infinite. Over 300 trillion barrels on Titan: www.nasa.gov/centers/j...

[The FItzman]

pursley: oil on the moons of saturn?? more irrelevant abiotic oil bs...

[insideoil]

Just reverse the extract below. As US interest rates are dropped to pay for previous bouts of money printing, oil prices go up as supply/demand fundamentals provide fruitfull ground for speculators to hold onto the "real" value of their money.

"The US dollar remains under pressure as 'old Europe' and other emerging country investors have figured out that the US is just all rhetoric when it comes to financial discipline. The Fed is hoping to print our way out of our oil driven financial deficit. Each time the price of a barrel goes up a dollar, Ben just rings up the printer and tells him to ship another batch of hundreds out the loading dock."

Maybe the US needs to realise no-one else is coming to play with them this time. They would all rather burn in hell, and take their chances on their own. It must be really bad for that to happen - one would think. The solution has to be that the US raises interest rates - burns its banks, but gets the oil price to fall to at least tolerable levels for the world as a whole.

[optionsgirl]

No doubt a standoff with Iran would disrupt supplies in the middle east. Remember the 8 year war between Iraq and Iran? The Saudis, UAE can get oil out of the region with their own pipelines. I just don't believe that the Republicans will start another war a few months before the election ( although that would probably cinch Obama to become another one term democratic president--how could he possibly "change" the world if he inherits 3 wars?) I'm long Crude .long gold, long nat gas, long sugar( as a possible short term biofuel play- it will probably rise fast if oil spikes) and hedged like crazy.

[optionsgirl]

Fitzman: Your tax answer was very interesting. Personally, I believe in a flat tax based on consumption. If everything else (investments, business) could be kept by the wealth creators, our economy would be a lot stronger. Wealth creators create jobs and opportunities, and everyone consumes.
And no, I am not a libertarian, just an old fashioned republican who does not believe in fiat currency-currency should be backed by gold and silver, and believes in private ownership and a small federal government. I only hope that the next generation will live to see a time when the IRS is disbanded.I am saddened to see the ilk of both candidates and their parties. They certainly don't represent me.

[Mmarrkk]

Fitz: I agree with some of your theory and a good portion of your energy policy. However, you and I are on different planets when it comes to tax policy and the whole "ye who has a bunch should pay more" stuff! And in case you haven't noticed, the Dem's have been in charge of the House for going on 2 years now, so your blame of the Republicans is a bit off. Yes they have spent too much. But in many cases they have had to modify policies and plans to get Democrats on board. And they have a few "Repub's" that are more like you...liberals like Olympia Snowe and her ilk who really should just change parties. Since the Dem's have been in power in the House for almost 2 years, I'm still waiting to see something/anything they have done! Of course, I'm really really glad they haven't gotten anything done because everything they talk about is a disaster for the country and for me.

[cal48koho]

Mike Fitzsimmons is one of 5 or 10 people worth reading on a regular basis as is Jim Kingsdale on energy ideas. I made the move to energy stocks after reading Matt Simmons book in 2005 and haven't looked back since. I also totally agree with his heretical idea of avoiding "diversification&... which has been the holy grail of investment advisers for the last umpteen decades. It has been good advice of course for decades but if you buy Mikes idea that the paradigm is changing then it may behoove you to give up the old ways. I certainly have embraced his ideas and did so 3 years ago and I understand that Mike may be wrong on his concepts and his timing but the investment returns using this perspective have been pretty impressive. I don't expect returns going forward to match my numbers of the past 3 years but returns on most US stock categories have been abysmal for the last decade. The s&p has given you less than 4% annualized and if you take into account that measly 4 % matched against the decline of the dollar, you have had real negative returns. Unless there is a sea change in our national energy policy, our goofy Fed, our budget and trade deficit nightmare, our unfunded health and pension debacles and the incomprehensible ability of our economists to see the obvious, there is little hope for our economy, the dollar or the US markets outside of energy related companies. Really folks, it doesn't take a lot of smarts to figure this out and it still amazes me how many yammering bobbleheads still don't get it. Eventually of course they will and will pile into these stocks driving up valuations.

[cal48koho]

Mike Fitzsimmons is one of 5 or 10 people worth reading on a regular basis as is Jim Kingsdale on energy ideas. I made the move to energy stocks after reading Matt Simmons book in 2005 and haven't looked back since. I also totally agree with his heretical idea of avoiding "diversification&... which has been the holy grail of investment advisers for the last umpteen decades. It has been good advice of course for decades but if you buy Mikes idea that the paradigm is changing then it may behoove you to give up the old ways. I certainly have embraced his ideas and did so 3 years ago and I understand that Mike may be wrong on his concepts and his timing but the investment returns using this perspective have been pretty impressive. I don't expect returns going forward to match my numbers of the past 3 years but returns on most US stock categories have been abysmal for the last decade. The s&p has given you less than 4% annualized and if you take into account that measly 4 % matched against the decline of the dollar, you have had real negative returns. Unless there is a sea change in our national energy policy, our goofy Fed, our budget and trade deficit nightmare, our unfunded health and pension debacles and the incomprehensible ability of our economists to see the obvious, there is little hope for our economy, the dollar or the US markets outside of energy related companies. Really folks, it doesn't take a lot of smarts to figure this out and it still amazes me how many yammering bobbleheads still don't get it. Eventually of course they will and will pile into these stocks driving up valuations.

[The FItzman]

optionsgirl: ok, so we are making some common headway on taxes because i too would like a flat tax. however, the financial hole we are in now is so large, i don't see how we get out of it without raising taxes on the super rich to a much higher level. btw, when i say super-rich, i am talking about the people with tens of millions of dollars. sometimes i think americans with a couple million think they are "super rich" when in fact, a million bucks sure aint what it used to be. btw, alot of middle east oil still runs through the straits of hormuz..despite the pipelines. i am an "old fashioned republicans" too, problem is there is nothing "conservative&quo... about the group in charge. it is, without a doubt, THE most radical presidency in the over 200 year history of the USA.

Mmmmark: well, sorry you dont like the tax policies i support. i guess you'll take your extra tax breaks, watch the US dollar sink further, and think you are getting ahead (?). what's your net worth? reason i ask, the people i want to tax further are the ultra rich. many Americans think they are in this class, when they really aren't. btw, most of the most harmful financial policies of the Bush administration were passed during his first term, when republicans owned both the house and the senate. tax breaks while at "war" is just insanity run amuck, and the value of the US dollar is evidence of that fact. remember, it was clinton that balanced the budget after the last "republican" bush blew out the deficit. speaking of disasters, which you apparently believe are democratic in nature, let's look at the bush record of 8 years:
1) largest fiscal decificits in history
2) US dollar drops over 50%
3) inflation roaring
4) government lies about inflation rate to keep I-bond, and COL increases under control or deficits go higher
5) an S&P500 that has gone NO-where
6) sub-prime fraud while Fed looks the other way
7) Fed takes over *publicly traded* bear stearns

what is so great about this republican record? it's almost as though people are blinded by their ideology these days. i am not sure i could have done any more damage to the strength and welfare of the US if i had TRIED. of course, those of us who believe that the Bush's are British aristocracy and the British's aim of weakening the US so they can swoop in and divide up the spoils will understand that all this WAS done on purpose. but that is a whole nother story for which, i am sure, people will think i am nutz (despite the inconvenient facts of skull & bones and that bush's father was knighted by queen elizabeth and is a british subject).

cal48: thanks for the kind words (i'll send the check later). good luck with your investments. btw, with respect to timing, i have been on this path since about the time bush was elected - i was just late discovering SeekingAlpha. seriously though, you only needed to post it once :)

[The FItzman]

insideoil: whoops, forgot to address your comment. the problem is the Fed cannot raise interest rates because of the sub-prime debacle and the over-leveraged US consumer. see, that's the box the housing "problem" has put the Fed in and why we've only seen rhetoric out of Paulsen and Bernanke. If they raised rates adequately to keep inflation low and to support the US dollar, the US economic house of cards would fall. that is why i am so confident on the investments in oil, gold, and commodities in general. the US dollar is simply not the world's reserve currency (even though it is still the currency for which oil and many other commmodities are traded the world over). the world currency is now a barrel of oil, and will be for the foreseeable future (IMHO). thx.

[fireball]

i would not blame the republicans or the democrats. blame both. bitch about bush and iraq all you want. his daddy and that congress put us in a state of war. clinton sat in the office for 8 years and fired about fifty million worth of missles at the desert once. surely if he was better than his good friends the bushes he would have tried to sign a peace treaty. and how many congresses left us in a state of war? whoever wins should appoint hillary as the minister of futures trading. she must really have a knack for it. our country will be overflowing with wealth. i cannot decide which liar makes me sicker obama yo mama or mccain the pain. wake up realise that these are all peas from the same pod. when they say they want to help you grab your wallet and your loved ones and duck.

[fireball]

oh yeah almost forgot buy some gold and silver.