Respirate

Buy and Hold Isn't Dead Yet

I appreciate your low-risk buy and hold strategy. Thanks for sharing it.

I must question your choice of Aetna in your investment group. They may be profitable and investable (yes to both), but Aetna is the kind of health insurer you hope others do NOT emulate. As a healthcare administrator and provider I can say Aetna is the poster child for poor operational performance on behalf of both health providers and the insured. Just an ugly company to deal with - there are better choices in this sector.

I'd also suggest Conoco Philips COP as a well-run buy and hold substitute for BP. COP is poised to drastically increase earnings when NG demand rises in step with a gradually improving economy. COP recently announced a 6% increase to an already generous dividend, coupled with the sale of $10B of productive assets to improve its balance sheet.

Discl.: Long COP

Stay Away from U.S. Treasuries - Invest in Energy Stocks

I have no interest in the pointless tit-for-tat above, but there is a positive article related to the discussion re: NG supplies that supports the notion of NGVs for transportation among other uses:

"The nation’s estimated gas reserves have surged by 35 percent, according to a study due for release on Thursday (6/17). The report by the Potential Gas Committee, the authority on gas supplies, shows the United States holds far larger reserves than previously thought. The jump is the largest increase in the 44-year history of reports from the committee. The finding raises the possibility that natural gas could emerge as a critical transition fuel that could help to battle global warming. For a given amount of heat energy, burning gas produces about half as much carbon dioxide, the main cause of global warming, as burning coal. Estimated natural gas reserves rose to 2,074 trillion cubic feet in 2008, from 1,532 trillion cubic feet in 2006."

Full article:
www.nytimes.com/2009/0...

--R

What U.S. Needs Is Long-Term Comprehensive Energy Policy

Michael, we're of like mind regarding the threat of continuing to import oil, for interdependent reasons both economic and global-political.

Hopefully the long overdue the new efficiency standards will cause manufacturers to consider EVs and NGVs as a way to meet them. Won't these non-gasoline vehicles, or EV-gas-NG hybrids, factor in to fleet averages?

Manufacturers may also look at EVs and NGVs as a way to make and sell comparatively larger vehicles than would be possible with strictly gasoline power. The primary way to squeeze the most miles from gasoline vehicles is to make them smaller and lighter.

Unfortunately the new standards are a mere piece of a new energy plan, not an end. The standards by themselves won't eliminate enough oil importation. If more vehicle-miles are consumed in these higher efficiency vehicles, we're not better off in regard to foreign oil dependence. Importation is a far greater problem than just consumer out-of-pocket cost - but again, the two are related.

How does the Administration get past this first step? They don't -- not without public outcry or an externally generated "crisis". The "crisis" scenario is far more likely in this country, given the sheeples' penchant for living on cruise control vs making proactive changes that require sacrifice and - gasp! - change.

As far as energy-related stocks go -- about 1/3rd of my positions -- I concur with your picks, especially Conoco among the oil bigs, and strongly recommend Noble (NE) as by far the cheapest and best run deep-water driller. Also take a look at National Oilwell-Varco (NOV), which is still dirt cheap and which dominates its niche. Disclosure: all three are part of my long term portfolio.

In case you missed it: good SA post on declining spare capacity:
tiny.cc/2iJlk
--R

Fuel Systems Solutions, Toyota and the Phill

New SA posting on Fuel Systems by Mark Krieger. Worth a quick read.

seekingalpha.com/artic...

I don't like buying stocks that have jumped like this one has, but I may make an exception here.

--R

Making Natural Gas Transportation a Reality

Michael, thanks for another exceptional article tying together the topics and constructive comments of the past several weeks. IMO this is by far the best written and most persuasive of the series.

You've convinced me that we could be very close to reducing our gasoline use and foreign oil dependence IF the national will were there. Unfortunately ours is a reactive, not proactive society. Despite our self image as a forward thinking people, the reality is that precious little is accomplished proactively, little sacrifice for our future is made, unless it involves lining our personal pockets. Therein lies the key to acceptance of NGVs. It has to be advantageous economically, either now or projected into the immediate future.

Action may be forced upon us the next time oil prices skyrocket, or if (heaven forbid) crude supplies become interrupted. That's exactly the wrong time to find panic-driven "solutions" - a la ethanol, or spin-doctoring "clean coal" and other non-solutions. No, I'm not very optimistic for thoughtful planning to find intelligent solutions for our energy problems. Still, I'll voice my enthusiastic support for an NG bridge solution to my local legislators and others, using some of your text (with credit given) if that's ok.

I'm sick and tired of this great nation making bad choices and failing to take timely actions, leaving us at the mercy of outside forces. By acting now we can preserve our freedom of action and do better for our posterity.

--R

Is There Enough Natural Gas?

Congratulations, Fitz ... your work here really helps to define the scope of what NG may or not be able to do for our energy future. (You had a busy weekend!) I've been through your article only once so far, and it raises both answers and questions.

- a 20-30 year supply (for all uses) on the shorter end doesn't sound like much help, but balanced against the marginal outflow of wealth to some global rivals like Iran, SA, etc. it would be well worth pursuing.

- long before the eventual end of NG supplies and "peak gas", lower yields and more difficult exploration may drive up prices for all uses

- what will the distribution map look like for NG as motor fuel, vs. industrial and home heating uses?

- a far more complex problem will be to estimate the impact of motor fuel use on NG prices (still better to spend some of the wealth internally than send it to foreign oil suppliers).

- it appears that NG is not 'the' answer to our energy needs, but could be an important part of the overall answer for the relatively short to intermediate term

Thanks also for focusing on facts and numbers in search of constructive solutions rather than whine about big government and bad luck. When time allows I look forward to pouring through your article in greater depth.

- R

A Natural Gas Centric Strategic Long-Term Comprehensive Energy Policy

Hi Michael,
Excellent, persuasive article on your favorite topic! NG transportation happens to be important to me also, and that's largely due to some of your recent articles.

I’m frustrated beyond belief that our country is so sluggish to do anything to address the energy noose around our collective necks. We just continue to kick the can down the road. That’s been a 35 year road by my count. Ho-hum. Oil is relatively cheap now. Life is good. We can fill our gas tanks for less than two bucks a gallon. Funny how the sudden price drop makes everything seem so warm and fuzzy. Problem solved, another crisis averted by that trusty American standby -- procrastination.

The need to supplant at least a portion of our oil imports is obvious, as has been successfully argued in your posts many times.

It's hard to believe that NG/CNG is virtually ignored as a motor fuel, for all the reasons you mention. It's a proven technology that we can use NOW! Guys have been doing self-conversions of cars and pickups for over two decades. Local government fleets have proven the technology.

That NG would reduce air pollution is obvious. It's a much cleaner burning fuel, so much so that people somehow find a way to burn it in their kitchens to cook dinner. It's long been known that lubricant oil changes can be extended to the durability limits of the lubricant itself, because it doesn't become contaminated by gasoline combustion byproducts.

I suspect that the main drawback in the minds of many people is along the lines of concerns raised by User283977 in another post, whether " ... we have sufficient natural gas reserves to meet 10, 20, and 30% of transportation demand over the next 20 - 30 years ...".

Another huge concern is the impact on NG supplies and prices. That really needs to be addressed in a convincing way by anybody arguing for using NG as a motor fuel. Many people, especially politicians, would cringe at the thought of burning NG in competition with the mom and her shivering kids who already have a hard time paying for home heating in the dead of winter.

People just need a bit more reassurance on availability of supply and price. Don't get me wrong. I want that Toyota NG-Hybrid today! I believe NG is a viable and immediately available supplement to petroleum distillates for transportation. I look at it this way: political will and popular support were able to push ethanol forward until it became painfully obvious that it was a very bad idea. The US went to ethanol because it's easy. It was easy politically because it immediately appealed to the grain belt states, and it’s easy to produce using old technology, and it blends into the existing fueling infrastructure - except that it must be transporting by trucks, not pipelines. If we can develop ethanol despite its net consumption of more energy than it provides, NG as an intrinsically superior alternative, should be a fairly straightforward sell to the American people.

--R

Peak Oil: China vs. USA

Michael, thanks once again for an interesting and important article. Thanks also for treating SA readers with a modicum of respect. There are contributors whose weak egos can’t tolerate disagreement or criticism. Your restraint earns you credibility in my book.

You said, “thought Obama would be a bigger man than to support something like coal simply because his home state of Illinois is a major producer of coal.” Reality bites. Coal causes more problems than it solves. I too had high hopes for more change than we’ve seen, but hey, given the system politicians now work under, they can’t offend any big lobbies (coal, coal states) and expect to gain reelection. He would be politically crucified if he took a harder line.

The Chinese leaders appear to be brilliant, forward-looking people. They seem to be able to see through the fog of the moment and strategically plan for the future according to the facts at hand.

Fixated on the energy topic? Yeah, you might be OCD, but somehow the fire must be lit under enough people to make noise and effect change. The people who fought for this country’s independence aren’t around to make sure we keep it. We as a people seem determined to give it up. Spending ourselves into oblivion is one way. Energy dependence is certainly another.

I personally don’t like the term “peak oil”. It’s so easy for some folks to stop thinking and start arguing about the concept. Whether or not “peak oil” is the central cause of our energy problem isn’t an important argument. Peak or no peak, supply and demand or price speculation, all we have to do is look at the recent price turmoil in energy markets to realize that we’re not now in control of our destiny. And remembering where so much of the energy wealth flows should make us all shudder.

On the personal investment front we agree. I’ve owned ConocoPhillips shares for a long time, and Burlington Resources before the COP buyout. Fully a third of my portfolio is dedicated to energy related companies, Noble (NE) and Ensco International (ESV) among them. Why a natural gas giant like ConocoPhillips doesn’t generate more interest in expanding NG use is beyond me. I do believe that natural gas, and oil for that matter, won’t remain at give-away prices indefinitely. The long term outlook is clear.

-- R.

Time to Fill Up on the Strategic Petroleum Reserve

Hi Michael --- What you seem to propose for the SPR is common sense for most of us, reflected in the adage, "Fix the roof when the sun is shining."

Same is true your your modest tax propopsal. Tax phobes will scream about it ( and about anything else that has a "public good" ring to it), but the private sector hasn't addressed the problem of developing viable alternatives foreign oil dependence since, maybe 1973. I think that's the first time I remember sitting line for gasoline, under thumb of foreign suppliers. The effort could use a push. Or maybe some would argue that cheap oil is here to stay. Uhh ... ok. Until next time.

As you suggest, energy companies are incredibly cheap now. Every so often we get it in our heads that oil investing is obsolete. I'd like to publicly thank all who think that and are dumping their shares. The majors you mention are superb investments. You didn't mention the best deep drillers that are also out of style -- I've been steadily buying Noble (NE), most recently for $26 and change. Just in case we again decide that we need a little more oil someday.