Why Obama is Wrong on Natural Gas

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  • What’s wrong with our oil use?
  • Why I’m worried about Obama’s energy policy
  • Obama is right for the wrong reasons
  • What to buy

If you were within earshot
of a television yesterday, you might have heard President Obama talking about
how the United States
needs to end its addiction to crude oil. He outlined some of the more obvious problems of using 20% of the
world’s oil, while only possessing 3% of the world’s oil reserves.

I’ll let him speak for
himself:

“Without a major change in our energy policy, our
dependence on oil means that we will continue to send billions of dollars of
our hard-earned wealth to other countries every month — including countries in
dangerous and unstable regions. In other
words, our continued dependence on fossil fuels will jeopardize our national
security. It will smother our planet. And it will continue to put our economy
and our environment at risk.’’

He makes
many fine points. But none of them are
very timely. America has run an oil deficit for
decades, and we’ve been buying oil from dangerous and unstable regions for at
least that long. Our national security
hasn’t just been jeopardized, it’s already been breached!

One of the primary reasons
the 9/11 hijackers gave for crashing planes into the World Trade Center
was their objection to American troops stationed in Saudi Arabia. If you think we have soldiers stationed in Saudi Arabia
for ANY reason other than energy policy, I’d love to hear your theories. Send me a note at [email protected].

Smother our planet? I don’t even know what that means. If he’s referring to the spill in the Gulf,
he must have a short memory. Just a few
weeks before the rig exploded and the spill began, Obama announced he would
open the Gulf of Mexico to MORE drilling.

Here’s a quote from The
Wall Street Journal on March 30, 2010, just 3 weeks before the leak
started:

“The Obama administration will propose allowing
offshore oil and natural-gas exploration and development in a large swath of
the eastern Gulf of Mexico…”

So, when
the President remarked that he would support more natural gas production, I
have to worry. What happens if there’s a
highly publicized natural gas disaster? There’s already plenty of grumbling from folks in the Marcellus Shale
areas in Pennsylvania. Click
here to read a story from earlier this year in The Wall Street Journal
that describes how modern natural gas production techniques can pollute well
water.

I know I’m being critical, I
do actually agree with the President on one point. We should tap into our natural gas
reserves.

So why do I say the
President is wrong on natural gas? Consider it a minor difference of opinion with some major
implications. We should use natural gas,
but not because of the spill in the Gulf, or because it’s cleaner than oil, or
because it’s politically expedient. I’ll get to my reasons in a second, first I
need to discuss why I’m opposed to politically motivated energy policy.

I happen to think we should
continue drilling in the Gulf, and I’m about as much of a pollution expert as
President Obama, so I won’t go out on a limb and claim that natural gas is
substantially better for the environment than crude oil. Is it politically expedient to tap into
natural gas? It appears to be, at least
for now.

But politically expedient
decisions are the types of knee-jerk Government reactions that hurt, not help
our energy situation. I have to
fundamentally disagree with any politically-based energy decisions, because
those types of decisions are almost unanimously disastrous for this
country. For example, it’s been
politically expedient to go to war in the Middle East,
to name just one disaster.

So while
Obama might be right to champion natural gas, I fear that it’s for the wrong
reasons.

Here are the only three
reasons I’m excited about natural gas, and they also happen to be the only
three reasons why anyone should ever be excited about any energy source:

It’s cheap

We have lots of accessible supply

We have the technology to use it

Think about other
alternative energy sources and you’ll realize that none of them meet all three
criteria. Solar is plentiful, but
expensive to access, and the technology isn’t quite there yet. Wind is expensive and has accessibility
problems. Geothermal is cheap, and we
have the technology, but there’s not a lot of supply in this country. The only other alternative energy that comes
close is nuclear power, but you can’t drive a nuclear car. There’s also the potential for a uranium supply
crunch if we shift to nuclear.

So natural gas is the clear
choice for both electricity generation AND automobile fuel. And I believe it will emerge as a partial
replacement for crude oil. But that
shift won’t happen thanks to strong words from this President or any
other. It will happen because the energy
is cheap, plentiful and usable.

If you want to own the
company with the most natural gas production in America today, you should buy Exxon (NYSE: XOM). I know, Exxon is the largest oil company in
the world – but they also have extensive natural gas exposure, especially since
they bought XTO Energy (NYSE: XTO) earlier
this year.

Take a look at the graphic
to the right that shows natural gas production from last year – it shows how
production from XTO added to Exxon’s production makes Exxon the largest
producer of natural gas.

I also encourage you to read
this
report all about one of the largest potential natural gas finds in the
world, in a region called the Bakken. There are three companies with the lion’s share of access to the Bakken,
and you can read all about them in this
write-up.

Good investing,

Kevin McElroy

Editor

Resource Prospector

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