Calicrisis means long-term gains for energy stocks....
Hi Mark,
Not sure if you saw this article...posted on another board. Just FYI.
Calicrisis means long-term gains for energy stocks - Don Coxe
Any energy policy that works will mean higher prices
National Post, January 27
By Donald Coxe
During the seemingly endless election campaign and the seemingly endless post-election campaign, Republicans worried that George W. Bush had
an energy problem. Compared to the indefatigable Al Gore, he seemed at times to have entered the late stages of entropy.
He campaigned fewer hours per day than Gore, took naps on the trail and weekends off to rest up at the ranch. He went fishing during some of the
tensest times of the Florida recount.
Now that he has White House bedrooms at hand, he has instant surcease from the strain of office. What he will have trouble evading is another
kind of energy problem: The U.S. is being punished for two decades of bad energy policies based on a dangerous mixture of complacency,
ideology and flakism.
California is leading the way, as it has historically in other kinds of socio-economic change. The economy that produces (according to BMO
Nesbitt Burns Inc. chief economist Sherry Cooper) 13% of U.S. GDP (and would be the world's sixth largest if on its own) is blowing its fuses.
The latte Left who Californicated the state's electric industry naturally blame everyone but themselves. In a series of ecological epiphanies they (1)
deregulated wholesale prices; (2) froze consumer prices; (3) injected even more soulful content into their long-standing approach to creation of
new supplies, which has made the approval process for the building of new generating and transmission facilities the preserve of a cacophonous
collection of Greens, consumer advocates, bureaucracies, politicians, trial lawyers and anarchists.
Jerry Brown, former Governor Moonbeam and now mayor of Oakland, said last week that the solution for his community (the state's eighth
largest) was to end all reliance on non-renewable energy and salmon-destroying hydro dams: His citizens would flourish with windmills, biomass
and solar power. (The only problem any of his allies see in that brilliant strategy is that the windmills are killing an alarming number of giant
condors, who are, like right-wing politicians, rarae aves.)
California's booming high-tech economy has a distressingly voracious appetite for electricity. The faddist view was that it was only smelly,
polluting, non-Californian industries like steel mills that craved amps in the gazillions. It turns out that turning on the Internet and all those alluring
download programs turns up electric demand far above forecasts.
Already, Silicon Valley is in a stage of non-electric shock. Fabs whose operators thought the area quite fabulous are being shut down without
warning by rolling blackouts. Intel and other biggies have warned they will move facilities out of the Golden State if they can't count on reliable
power.
Bush would doubtless prefer to let all those liberal Democrats stew in their own lack of juice. His vote total in California resembled Gore's in
Texas.
But if California's economy falls into a tank marked "Empty," that would be a body blow to the national economy. Moreover, California is reliant
on power from the Western Grid, which draws surpluses from states such as Washington, Oregon, Arizona and Nevada. They don't have the kind
of surpluses they used to have, even though they are building new generating plants. California's shortage is a burden for the whole West.
Another aspect of this Calicrisis is the sudden shortage of natural gas. Virtually all new generating plants are gas-fired, and the prospect of US$8
per mcf for the non-polluting alternative to oil and coal is painful for governors and businesspeople across the nation.
Bush and Vice-President Dick Cheney both come from the oil industry. That's the good news. Bush and Cheney both come from the oil industry.
That's the bad news.
Selling a supply-side-driven energy policy for a nation that thought expensive energy was a '70s anachronism will not be easy for these two
knowledgeable men, because the latte Left will scream they are enriching their business pals. Any energy policy that works will mean much higher
prices, on average, for gas and electricity for years to come.
But that is what will happen, after the tumult and the shouting die.
As stated in this space on many occasions, I think energy production is a core investment concept. Consumers will have to pay up for it and
investors will have to pay up to own it.
Out of Bush's energy problem will come sustained gains for oil and gas stocks.
Donald Coxe is the chairman of Harris Investment Management of Chicago and Jones Heward Investments.; don.coxe@harrisbank.com
nationalpost.com |
