U.S. Obstinacy Means High Oil's Here to Stay
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The fault in Congress is not the oil companies, it is Congress itself. Just yesterday we saw the Bureau of Land Management issue restricted rules on drilling on government lands. Drilling for natural gas in Wyoming, a major resource, soon stops for small mating animals. It's a political third rail to talk about drilling off coasts for oil .We don't even know if it is there because it isn't worth exploring. Much of Alaska's off-limits. Vital animals.
We're a joke.
Think of it -- every country in the world is trying to find more oil wherever it can be found. Except for us.
We have two important alternatives to oil: natural gas and coal. We can't even pass rules for coal so that
McDermott
(MDR) - Get Report
knows how much emission is allowed and the utilities can bring in
Foster Wheeler
(FWLT)
to start the process of building reduced-emission coal. What good does it do if the rules come down next year, or ever, and the utilities have to scrap the cleaner coal plants they want?
Our auto companies are pretty much allowed to make any cars the traffic will bear. We have no rules for conservation at all.
NRG
(NRG) - Get Report
, which wants to build nuclear, took a step backward by launching a bid for
Calpine
(CPN)
. This is the only utility that even has a plan to build a nuclear plant in this country. Local folks block them. The federal government says, "Sure, it's fine, go ahead," like that helps.
And the only thing that Congress is fired up about -- besides beating up on hapless oil companies that have their assets being expropriated in the big oil drilling areas -- is making sure that the farmers get subsidies, the very cohort that is doing better than any other group of workers in the country.
It's pathetic.
I know it's a bubble. You know it's a bubble. We know oil went up too fast.
But we also know that there are no new finds beyond Brazil, and Brazil has made it so if there is a new find, you can't drill it because the rigs are almost all leased by
Petrobras
(PBR) - Get Report
. Can't find it; can't drill it.
Unless you are in America, where you aren't even allowed to look for it where it most likely is.
I think oil can come down. But I think oil is an "up stock" and the decline will be a buyable pullback and will remain that way until we either
find big, easy-to-drill fields, which I think is an impossibility, or
use less so the inventories build.
As of yesterday, despite the higher prices at the pump, that's not happening.
My take: Get used to it. Invest as if oil's going to be north of $100 for some time.
Otherwise you will underperform.
Random musings
: I had a disconcerting visit to
Dick's
(DKS) - Get Report
where nobody knew what the prices were of the things I wanted to buy. Talk about an anecdotal tell of a disaster! In reality, you could tell that discretionary sports are going to be crushed because
BJ's
(BJ) - Get Report
said that sporting equipment was one of the weakest areas. It's worth listening to that conference call to show what people are cutting back on.
At the time of publication, Cramer was long Foster Wheeler.
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