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February 13, 2011

Comments

Choke,
On point with taxation and other issues you discuss from time to time, I would like to share a thought with you regarding US energy policy. As you know, we have no formal energy policy. If we were following a written policy, people would be holding the document up on TV with one hand and backslapping it with the other, screaming about how idiotic it is and how it damages the average working American. We send about 300 billion dollars a year of hard cash to other countries every year for crude oil. I can’t imagine the same capitalists that brought us the swap bailout not salivating over this income stream. Do you think they don’t have their tentacles deep inside these transactions? Who benefits from the status quo? One can imagine a “shadow” energy policy that skims billions off of this cash flow stream. Do you really think there is no energy policy with this kind of cash involved? Am I really expected to believe all this just happens willy nilly, and as a country we just keep hop scotching around with silly, temporary energy policies? I don’t think so. The only way we can keep up the status quo is to not have a defined written energy policy. Any kind of comprehensive energy policy would probably have some elements of arch baddie Boone Pickens ideas in it, as much as I hate to admit it, and it would interrupt and reroute much of the existing cash flow stream. Benefiting the America is not the end game. It is all about the money. That is the beginning and the end of it.
One thing I do know, and that is when this amount of scrilla is involved it brings out the brightest minds in America. They call it capturing an “opportunity”. I don’t want to sound too “Alex Jones”, but in my opinion you and I and most of your readers are way too small to be on the inside of 21st century America. You guys are going to be bitching and complaining about government and taxation (rightfully so) right up to the grave unless there is an unwinding of the present economic policy, and an undoing of the power base that sets it. Do you think being a Democrat or a Republican or a xyz makes any difference? The problem is not the label of the politicians. The problem is the motives and power of the financial interests that are flicking the switches.

That's right, Royale. We have no national energy policy because the "people" wouldn't sit still for it. No body is going to tell them what kind of car to drive, what kind of light bulb to use, how much of their tax dollars are going to be spent on uneconomic sources of energy.

The Saudi royal family is the ultimate broker of energy power and money, and who advises them? Goldman Sachs of course! Every NYMEX trader has a peice of the action, every i-banker has a slice, all the major integrated oil companies get involved in the money flow...but what is the alternative?

You go and buy oil from Hugo Chavez, put it on your boat, bring it to Norco, LA, and have it refined into gasoline, which you transport to your storage facilities at your house to put in your car at your convenience. Do all of this with YOUR money, which you gladly take out of the bank, and replace the modest amount of interest you would have recieved with the lower cost of energy for you and your family.

In fact, take it one step further: get a group of like minded friends and neighbors together and do the same thing on a larger scale! Now you need to memorialize the ownership and financial aspects of the transaction, so you form a company. You want to take as much risk as possible out of the equation, so you make certain deals with your supplier (such as a guarantee to buy x bbls at y price). Now you have become an international corporate player in energy.

Or you could continue going down to Valero and filling up.

Are you saying that American’s generally don’t want a national energy policy because they think it may infringe on their rights? I am not sure I am understanding your point.

I am questioning whether we have a refined, but unwritten energy policy wherein special interests benefit from the status quo. I don’t know this to be true, but I certainly can imagine it given the size of the capital being transferred and the fact that every other industrialized country has an energy policy.
You quite often write about government imposed barriers to success in the oil business. If this is true, perhaps you are too small to be a capitalist in America. Perhaps you are over taxed and over regulated, a situation that seems to not exist within the halls of American high finance. If this is true, then the capitalists are really your enemy, not your brethren.

Yes, I am saying Americans don't want a national energy policy because it will infringe on their rights. Americans historically put their individual freedoms above national economic issues (with several notable exceptions) until things get so bad they have to take notice because it effects their own personal welfare. It is a fairly easy point to understand and hopefully you can apply it to your own situation.

Did you ever wonder why jails around the world are filled with dissidents who want more news/information while here in the land of the free we pay little or no attention to the news and make little use of the information we have? Think about that.

I haven't written about government barriers to success in the oil business. I think the regulatory regime we enjoy currently would be adequate if the regulators do their job. When they don't, they attempt to shift blame to the industry they regulate and overreact to anomolies.

I am more concerned about overzealous regulation of financial markets as a result of inadequate regulation in the past. When Robert Rubin, Larry Summers, Bill Clinton and Alan Greenspan decided to NOT regulate financial derivatives, they set into motion a prophecy of failure that took years to fulfill. The regulators at the SEC, FDIC and FRB under the Bush administration compounded the problem by not seeing the issues because no one had comprehensive oversight.

I would submit that I am "right sized", my company is big enough to make economic sense and small enough to make course corrections when needed. I pay the right amount of taxes and operate in a regulatory environment I understand and for which I have tailored my business policies and procedures. We made course corrections in late 2007 and early 2008 which netted us millions of dollars based on a combination of luck, alacrity and paying attention to warning signs in the overall economy. Of course we got beat up like everyone else in the ensuing months, but we were better positioned to weather the storm. Each of my 326 employees liked that since we didn't lay off a single one. (We did elect to not fill some positioned left vacant by attrition, but that was just smart use of resources.)

There are capitalists of every size, small business owners and superhuge hedge fund managers, but capitalism is NOT an evil system in my view. As a fairly small business owner, capitalism makes it possible for me to fulfill my personal goals.

Wow. Nicely put, Hondo. I would suggest that America is more folks like Hondo than they are these phantom capitalist big oil bogeymen popularly characterized.

Hondo, I am not quite sure how a national energy policy effects people’s rights. It just depends what is in the policy. I do know that our trade deficit is about 50% energy imports. I think the total number is about 43 billion per month, contributing to unemployment, reduced access to health care….etc. What about the right to eat and have a job? A sensible national energy policy should keep dollars here, create jobs, clean things up…etc.
I don’t like Boone Pickens but he makes some good points regarding switching large trucks to natural gas, as well as some other issues. Who’s rights get infringed on by doing this?

I agree that civil liberties are under assault, but certainly not from energy policy. I have just come back from a fairly long stint in Asia and I have seen the benefits of national energy policies. We are one of the only countries in the world that does not have one. Perhaps we could use natural gas to displace some our imported oil, like most every country has done.

I agree Royale, whether it infringes on rights remains to be seen but I suspect it would be minimally invasive (like a prostate exam vs. a prison shower). The perception by many Americans is that it would be a socialistic travesty of biblical proportions, especially for those who commute to HEB in the 4x4 super duty crew cab tpickup trucks. This is the same perception of those who believe Obama was born on another planet and i a practiciing Shiite muslim!

So why don't you like T. Boone? You know him?

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