In February of 2011 I wrote a Seeking Alpha article entitled "When Will Social Networking Promote Democracy in the United States?" That article was inspired by the "Arab Spring" and the role Google (NASDAQ:GOOG), Facebook, Twitter, and other social media companies played in the large and very relevant social revolution going on in the Middle East.
Recently the question posed in the title of that article was answered when we witnessed a truly amazing event here in America. Some very controversial legislation was being steam-rolled through Congress. These were the so-called PIPA (Protect IP Act) and SOPA (Stop Online Piracy Act) bills. Many people (including myself) and many internet companies felt these bills would forever change the internet as we know and love it today. The main objections are that the bills could stifle innovation, enable censorship, and the very controversial DNS filtering could disrupt the internet's addressing system and in itself increase security issues.
The good news is that social media companies like Wikipedia, Google, Craigslist, Mozilla (makers of the Firefox browser), Facebook, and many others banded together to fight this legislation. The companies contacted their representatives and loudly complained. Websites were shut-down and blacked-out in a day long protest. Companies contacted their user-base, informed them as to the dangers of this legislation and urged them to contact their Congressional representatives and oppose the legislation.
The effect was quick, powerful, and quite phenomenal! Senators hustled to speak publicly about their (sudden, new) reservations and the legislation was tabled. The fight is by no means over, but this was the first big victory in what I have been hoping for: social democracy via the power of the internet. It is ironic that our first successful example social democracy via the internet was over legislation the "powers that be" may have actually been able to use in order to prevent such action.
If only these powerful internet companies would band together in order to beat the special interests and solve America's biggest economic problem: its addiction to foreign oil. The 2011 oil import numbers are in and it's not a pretty picture. In 2011, the U.S. imported 4.1 billion barrels of petroleum, accounting for 60% of the U.S. supply. The total cost of those imports was $453.6 billion. That represents an increase in cost of 34.6% over 2010 and a whopping increase of 71.8% over 2009.
Oil prices for 2011 averaged their highest ever (around $100/barrel) and therefore America's foreign oil import crisis is indeed worsening. This means America's economic crisis is worsening - we simply cannot separate the two issues. Large oil imports mean America's wealth is being sent overseas. This is the main reason behind the Federal Reserve printing more money.
If the U.S. dollar was not the world's reserve currency, Americans would feel soaring inflation as the value of its currency would drop like a rock. How long can the U.S. continue on this dangerous path? It's the big secret that Congress and the Federal Reserve won't talk about: America must reduce its foreign oil imports if it wants to remain a global economic power.
More than two-thirds of American oil consumption is used in the transportation sector. Logically then, if we are to significantly reduce foreign oil imports, we must reduce oil (gasoline) consumption in the transportation sector. The promise of electric cars has proved to be an empty one. Fully electric EVs are too expensive, have limited range, have battery reliability and material issues, and are in very short supply.
I have been saying for years now that the only domestic fuel capable of significantly reducing foreign oil imports is natural gas. Not only is it an abundant domestic energy source, but it is clean and cheap. In America natural gas is currently selling for less than half the price of gasoline on a GGE (gas gallon equivalent) basis. There are no technological breakthroughs or huge research dollars needed: NGVs and natural gas compressors to provide CNG have been around for nearly 100 years.
We cannot afford to simply trash all the gasoline vehicles, and they cannot economically be converted to EVs. However, many can easily and economically be converted to run on natural gas. Natural gas vehicles manufactured in volume would be very affordable; they have decent range, and would save their owners money on every mile driven. Best yet, they could easily be refueled in your garage at night while you sleep with an appliance that hangs on your garage wall.
So why hasn't America adopted such a logical solution to its foreign oil crisis? After years of working on this issue, I've come to the following opinions on why Congress hasn't taken action:
- Powerful lobbyists from the rich oil, coal, electric utility and railroad industries are against natural gas transportation for obvious reasons.
- The U.S. military and defense industry much prefer America's current energy policy based on war and foreign empire building. Again, for obvious reasons.
- America apparently feels the best way to protect Israel is to have troops in every Arab country in the Middle East.
- These powerful interests control Congress who then put up roadblocks to prevent natural gas transportation from taking hold. Addiction to gasoline (foreign oil) keeps the status quo and these companies and lobbyists get richer and richer at the expense of the American middle class. And the politicians get re-elected as their campaign war chests are fattened by the special interests.
It's a vicious cycle of political control that works against the middle class and against the best interests of the country at large. I will not substantiate my opinions further. I am sure we can have a healthy debate in the comment section of this article.
Yet, imagine for a moment the impact on the U.S. economy if we could reduce our foreign oil imports by 1/3 by adopting natural gas transportation. That would mean $150 billion staying inside the country which would flow to royalty holders, energy companies, and infrastructure companies like GE (NYSE:GE) and Caterpilar (NYSE:CAT). The multiplier effect would be enormous. The consumer would directly benefit from lower transportation costs and a stronger currency.
Even more to the point: If GOOG and AAPL are doing so great today, just imagine how these companies would thrive if the U.S. economy picked up steam and the unemployment rate would drop back down to say 5%. That's a whole lot more people that can buy iPhones and iPads and can Google their way to more spending.
Not only is it in the best interest of America and its citizens to adopt natural gas transportation, it is also in the best interest of those internet companies that could be on the leading edge of the social change needed to make it happen.
My hope now is that social media companies will understand the problem of foreign oil imports and the far-reaching negative social and economic effect it is having on America: the draining of American wealth, the negative effect on the fiscal and trade deficits, the effect of war on our people, inflation, unemployment and our moral standing on the world stage.
My hope is these powerful social media companies will begin to speak out on the issue of foreign oil and demand access to NGVs, natural gas refueling stations and home garage appliances. My hope is that the executives at these companies will understand that natural gas transportation is important so that Americans continue to have freedom of mobility - freedom that currently, with our addiction to gasoline, will be continued to be rationed by price.
Were Steve Jobs alive today, what I would give to have one hour of his time to talk about the critical impact a company like Apple (NASDAQ:AAPL) could have on this issue. How ironic is it that AAPL passed XOM in total market capitalization this week? AAPL blew away earnings estimates. The ecosystem AAPL has designed around it -- iPods, iPhones, and iPads -- is truly amazing. The company is having a profound impact on society. Imagine the impact such a company could have on the political environment in the U.S. if it cared to. Also, imagine how many more products the company would sell if the money being sent overseas for oil was instead kept inside the country as natural gas transportation ushered in an era of economic prosperity few today can even imagine.
So far, social media have been quiet on the issue of natural gas transportation. Sadly, oil prices averaged around $100/barrel in 2011 - the highest in history. Chances are oil prices are headed even higher in 2012 given a functioning world economy. Imagine what oil prices would be if the U.S. economy actually took off and unemployment fell? If oil averaged over $100/barrel as U.S. demand dropped, imagine where prices could go if demand starting picking up again. Scary.
I continue to recommend that investors stay the course with the same oil based investments I have recommended for years now in order to protect their assets.
ConocoPhillips (NYSE:COP) announced fantastic earnings yesterday, and is making great strides in its "divest and split" plan. Domestic shale oil production growth at COP is going to be phenomenal in 2012 and beyond. COP's dividend is 3.7%. The company began cutting back on natural gas production before most of its peers, and therefore is ahead of the curve in focusing instead on oil and natural gas liquids.
Whiting Petroleum (NYSE:WLL) recently sold off a bit after their Q4 production guidance disappointed. This was quite surprising to me, as its guidance for 2012 was to increase production 13-19% over 2011. Meantime, WLL replaced 164% of 2011 production.
This stock is one of the biggest oil producers in the Bakken and a prime takeover candidate, in my opinion. And of course there are the old war horses Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX). StatOil (NYSE:STO) should be considered for its excellent dividend and the best exploration results of all oil companies in 2011, when it made multiple huge discoveries.
My big hope for 2012 is that the biggest companies in social media begin to exert their political influence in a way that will benefit the middle class and make America strong again. A great start would be for these companies to support natural gas transportation.
Disclosure: I am long COP, WLL, STO.