Energy Investing in an Election Year

Energy Investing in an Election Year

by | published February 6th, 2012

As the United States enters the campaign season for the presidency, all 435 members of the House of Representatives, and one-third of the Senate, an important question enters my mind.

Where are energy issues in the pecking order of the policy debate?

After all, if we can figure that out, we can better lay out our investment plans for the year, too.

Energy remains a vital economic topic. Prices alone have a major impact on financial recoveries, company investment plans, and employment prospects.

The problem now is that energy – like a number of sectors before it – has become the latest political “football” in a taut ideological standoff.

Two issues are paramount, and both will reverberate in candidate stump speeches from now until the first Tuesday in November.

The first is the genuine bipartisan agreement that we need to import less foreign oil.
However, the second will undermine whatever accord might be gained across the aisle.

Because this one addresses what mixture of fuels will be preferred, and how much that balance will cost.

Actually, these have been the main energy themes in American politics for some time now. Being squarely within an election year only makes it even less likely that they will be resolved.

Expect More Gridlock This Summer

First, lessening imports of oil is always a popular theme.

That's because it translates into a lot of positive talking points about renewing local economies with accelerated drilling, the prospects of adding to the local tax base, and generating new domestic jobs.

But it does have a significant down side.

Yes, the U.S, could tap remaining pools of conventional crude oil, but it would need to accelerate development of the unconventional – shale and heavy oil, bitumen, oil sands – to have any real effect in reducing the import stream.

Remember, these sources are more expensive to develop, extract, process, and transport. The volume is there, but it's only attainable at a much higher price.

This is the reason why the imports persist. They're cheaper.

Politics tend to confuse two perspectives all the time… One is lessening our reliance on nations that don't really like us. The other is the concern over the cost to the American economy.

Developing at home (the “drill, baby, drill” approach) may offset the first.

But relying on additional domestic supply (with added volume from Canada, once we resolve the environmental ruckus over the Keystone XL pipeline) increases the problem with the second – higher overall cost.

(Funny how 30-second sound bites for political commercials never seem to tackle the trade-off problem.)

And Then There is the Balance Question…

Every time the discussion turns to the oil import situation, we focus on non-oil remedies – natural gas, renewables, and coal.

Each fuel source has its pros and cons that place them, once again, at the center of the ideological civil war.

Natural gas in general, but shale gas in particular, is regarded by some as the savior of the American way of life. After all, just the gas what we can extract now, with existing technology, would make us self-sufficient for decades.

Yet the very ability to bring large new volumes to surface runs the risk of undermining the market once it gets here. That's the “gas glut” problem I've talked so much about.

There are also continuing environmental concerns over what hydrofracking actually does, the integrity of aquifers, and essential water supply networks, with the occasional drilling-induced seismic tremor in places like Arkansas and eastern Ohio thrown in for good measure.

The water issue alone is a lightning rod in the debate.

The disagreement has intensified following federal and state environmental protection agencies indicating that drilling fluids contaminated water reserves in Wyoming and Pennsylvania.

Extreme Views Drive the Debate

Now there are a number of quite legitimate issues surrounding shale gas that require careful examination and open discussion.

Unfortunately, during an election year they get buried beneath the overly simplistic great divide of the “government is too big and intrusive” crowd, on the one hand, and the “big business doesn't care who they poison to make a buck” gang, on the other.

The same chasm inflicts coal (“too dirty” versus “our deliverance”) and renewables (“clean and the future” versus “too expensive and requiring large government subsidies”). Now each of these approaches actually does comprise an element that is part of a necessary and legitimate conversation about what energy balance makes sense moving forward.

The problem is the focus.

The campaign rhetoric ends up not being about energy at all.
Rather, any energy issue is quickly turned into another projectile in the divide between those who see “the other side” as either the big spenders moving us toward European socialism or those pandering to the profits of the 1%.

The U.S. is a republic, and such disagreements are par for the course. They sometimes even bring to light a genuinely important difference that needs to be addressed.

But not usually… and especially not in the current animosity.

As we gear up for the heavy political season, therefore, let's keep a few seminal matters in mind.

The guys inside the Beltway are not going to be resolving the energy impasse any time soon.

We know it, and the market knows it too.

The energy position, however, will not change. It is the most important single issue permeating the economy.

Oil costs will continue to increase, as will the price at the pump.

The natural gas glut, fueled by enormous shale deposits, will not be going anywhere.

Solar, wind, and geothermal will remain more expensive without government intervention; while nuclear will languish on in a post-Fukushima Daiichi scenario.

There will be serious challenges for the energy investor this year. Elections will resolve little in the sector, while some of the problems will become more acute.

2012 is already shaping up as a year in which volatility, instability, and rapid price movements will animate the energy sector. We can hardly rely on candidates or elected officials to solve (or even address) the real energy issues.

Once again, we seem to be by ourselves out here.

So perhaps the best approach for us is to just continue making money.

That's why I've asked James Baldwin, our regular contributor to Oil and Energy Investor, to provide you with one great way to profit in 2012.

He's promised to do so this Wednesday.

Stay tuned…



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  1. Tom Stiebler
    February 6th, 2012 at 14:02 | #1

    Do you think alternative fracing ideas – such as using lpg instead of water is a viable solution ? In other words – do you think there is investment potential in the likes of a GASFRAC Energy ? The ‘big guys’ don’t seem to be interested so far.


  2. Roger Duquette
    February 6th, 2012 at 14:07 | #2

    You keep talking about the pipeline from Canada. I have a few questions about it. You are the only place I know of to get straight sensible answers about this topic. I have read that refining the tar sands oil it would bring to our refineries is very dirty and produces more pollution than our usual sources of oil. Is that true?
    Why would it not make sense to place a refinery for that oil somewhere near the border so we would not have to transport it across the entire U.S.
    I don’t understand the need for the pipeline and I am very concerned about the future environmental effects of inevidable spills.

  3. Bernard Durey
    February 6th, 2012 at 14:32 | #3

    Well,Thanks for the welcome back. I guess the modem was bad or went out,intentionally or not. I do not know. But one of the sentences in a February 1,2012 has created some controversial debate. It reads as follos: The Keystone XL pipeline would not have crossed Missouri. But it had generated concerns because it would have cut through an environmentally sensitive area of Ne braska(that supplies water to eight states). That second sentence and the last words in parenthesis has caused or created some controversial opinions. I know it was argued in the issues of the pipeline crossing the sandhills and the Ogallala. But some question this meaning due to the fact that the Ogallala sits under eight states with about 67% of it under the state of Nebraska. I don’t know that it supplies water to eight states including Nebraska due to other factors,such as runoff in the other states that may get into the Ogallala. However,another thought was if someone was so opposed to it they worded it like that and might try to build a campaign as to stop it from crossing the state of Nebraska all together. They had a similar situation with the low-level radioactive nuclear waste case but some were not certain of the early language and/or the promise. However,the site was never built,as of yet at a cost of !46 million dollars plus. So just food for thought. Have anice day and I enjoy your articles.

  4. Barbara Roth
    February 6th, 2012 at 16:41 | #4

    There may be increased costs to get the unconventional energy up for use but when you counter that with the money spent with our involvement in national defense it probably balances out. If we were energy independent, we could basically tell the Arab countries that are so antagonistic to us to “Go to H@@@” and not care about their response. If we were energy independent, we wouldn’t have to try to play off both sides of the Middle East Conflict because it wouldn’t matter – we would no longer be a slave to their oil. We could pull out of the area, support Israel openly, or just drop bombs if need be to defend ourselves if we were attacked and not worry about oil prices rising. That would be the advantage of a true energy policy. How much have we wasted on the Middle East just to obtain oil? Thanks to all the new technology we can be energy independent if we just come up with a policy that encourages all types of solutions and let the open market figure out the winners and losers.

  5. constance blackwell
    February 6th, 2012 at 18:27 | #5

    @Tom Stiebler
    Yes I would like an answer on gasfrac – it seemed like a good solution to me – but only husky – if my information is correct seems to want to use it –
    do you know the problem?

  6. Will
    February 6th, 2012 at 20:57 | #6

    When people decide they would rather ride instead of walk, the energy problems will be solved, the U.S. is so spoiled by cheap gas prices compared to other countries that they forget that our own oil is here in the U.S.and that we need to produce it, I can take any subject and make a negitive from it if I so desire, also, I can make a positive from the same negitive if it benifits my needs, this is the problems of mankind, I have always noticed that any problem can be solved when the subject of the problem is well needed, example, people get mad when a flood comes, they rave and stomp that someone needs to build a dam, divert the water away from them until a drought comes and they need the water, then, the change positions and demand that the water be left alone so they can use it, as long as we have cheap oil, nothing will change in these negitive people, but when they begin paying through the nose they will change and demand more domestic drilling, forgetting about the possible problems with fracking, it take desperate needs to make desperate changes and soon, very soon, Americans will have to decide, do you want to walk, ride mules and wagons or do you want to ride in your cars, emvironmentalist are the most dangerous people in America, because they must join a group so someone can tell them what to do, they cling to these beliefs until it begins cutting into their pockets and then, they start looking for ways to keep their freedom of driving their cars to shop. People, the World has been here millions of years, has had thousands of volcanic eruptions spewing millions of tons of sulphur, iron and dust into the air, but guess what, the old man who made this earth had plans to keep it clean, what man does or doesn’t do has little effect on our weather and its a very good thing, if man controlled the weather, we would be in great danger, a golfer woud stop the rain needed by the farmer so he could golf, the farmer would have it rain so he could grow his crops and in return, this would make the man who was pouring cement mad because he had to stop work, but, guess what people, every thing on this old plannet is in a great plan that will continue as planned, you, me and all the greeners on earth can not change one day in this plan, if we live as we should, do our part to produce what is needed and have faith in the man who made this great big blue marble, all things wuill work out, but when we start thinking we are smarter than God, start believeing we are a superior people and that we can change the world, we are headed for hell in a hand basket and someone else is holding the handle, we should do our best to live as we should, have faith in God and use the natural reserves he gave us on this earth, and just why were these things created by God if they were not in his plan for us, have you ever wondered how man became smart enough to even drill for oil, drill for natural gas, discover how to refine it into usuable products, power airplanes, ships, trucks and cars, I have never met a man that could stop a rain drop, stop the sun from shining or dry up the sea, all these deposits of oil, gas, coal and other metal products were part of a great plan and each year, someone in our order of mankind is given the knowledge to find the answers needed to keep us going, can any man make a coal, oil, gas or gold deposit deep within the earth, if you can you have solved our prsent and furure energy problems, all things happen for a purpose, man can not change one of them, had God not wanted these energy deposits discovered, he would have sealed off the first oil well drilled, if you believe different and you are welcome to your beliefs, just try to create one oil deposit in the earth, I think the world would like to see this, we must use all our ability we are given and yes, I SAY GIVEN to produce the God Given energy on this earth, if God had wanted us to use windmills or solar power, it would have been done long before oil was discovered, wake up people, we are mear humans, we have no ability to do anything other than the nability given us by God, and its a very good thing we do not, can you imagian a world where man controlled all weather, sunlight and water, many people would starve and many would prosper, yet none would survive

  7. Ray Killorn
    February 7th, 2012 at 14:12 | #7


    Thank you for your insightful critique of American politics. The elephant in the room that you failed to mention is the continuing, albeit much diminished, drum beat about carbon emissions. The intellectual effort to label CO2 a pollutant has failed. Greenhouse operators enhance the air in their controlled environments with elevated carbon dioxide levels to make their plants grow faster. Reliable measurements taken over many years gives us no support for the alarm that demands turning off the use of the private car.

    Any discussion about the politics of energy needs to address the subject of cheap, readily available energy. The leftists hate it and the conservatives love it. An all ‘renewable’ future is an energy starved future. It is a future easily controlled by an elite few. Happily some high tech snoop found some emails uncovering the cooked data put out by the IPCC. (I think that stands for the International Panel on Climate Control.) There are still a few nuts out there pushing energy starvation. We need more energy, not less. And…

    You’re right – the most pragmatic and righteous solution to the problem is to encourage people to drive its cost down by making money from it!

  8. enthusceptic
    February 8th, 2012 at 07:56 | #8

    US energy self sufficiency? The rest of the world uses nat. gas to power cars and other light vehicles, why not North America?
    Now I’m officially a broken record: Are there really so few markets that North American nat. gas can’t be exported in order to offset the glut?
    The whole world is being held hostage to the US – Middle East situation.
    Last time I checked, nat gas was cheaper than Middle East oil. Correct me if I’m wrong.
    The stench of dirty politics – from the US – is overwhelming.We ordinary people everywhere need real solutions. Sometime soon would be very nice, thank you!

  9. February 18th, 2012 at 06:27 | #9

    If AL GORE and the eco-freak realy wtaned to stop this so called global warming then they should shut their big fat pieholes and shut of all that HOT AIR

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