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Kass: Dems Could Drain Energy

The Democratic Party's view toward the oil industry poses a significant threat to energy stocks.

This blog post originally appeared on RealMoney Silver on May 21 at 7:28 a.m. EDT.

Republicans want more drilling, more consumption and more tax giveaways for the big oil companies.... Democrats say that those are exactly the policies that got us into this mess to begin with.... We must end the billions of dollars in tax breaks for big oil companies whose executives have been hauling record profits while we pay record providing clean and affordable alternative energy and by protecting consumers from price gougers and greedy oil traders.-- Democratic Senator Debbie Stabenow (Michigan)

The Democratic Party traces its origins to James Madison and Thomas Jefferson. Since the party's division from the Republican Party 96 years ago, Democrats have positioned themselves to the left of the Republicans in terms of economic and social matters. Since the 1930s, the left-leaning activist philosophy of President Franklin Roosevelt has shaped much of the party's economic agenda. The working class remains the stronghold of the Democratic Party, and academia, youth, labor and ethnic minorities form its foundation.

Generally speaking, Democrats tend to favor the following economic and social policies:

  • a higher minimum wage;
  • a policy of developing domestic renewable energy;
  • a more progressive tax structure;
  • more government spending on social services;
  • less spending on the military;
  • affordable and quality health care;
  • stewardship of the environment;
  • publicly funded education;
  • equal opportunity for all Americans regardless of sexual orientation, religion or national origin; and
  • access to birth control.

Today the price of crude oil stands at over $130 per barrel, and last night Senator Obama claimed his political victory over Senator Clinton.

"A physical body will remain at rest, or continue to move at a constant velocity, unless an outside net force acts upon it." -- Sir Isaac Newton's First Law of Motion

If the

Democratic Tsunami of 2006

continues into 2008 with a Democratic Presidential win, a wave of Democratic populism and legislation will no doubt weigh on the (currently) extraordinarily profitable American oil industry. Here are

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to Senator Obama's views on oil.

"Rate of change of momentum is proportional to the resultant force producing it and takes place in the direction of that force." -- Sir Isaac Newton's Second Law of Motion

It seems to me that the pressured middle class, with rising inflation (particularly of an energy kind) and slowing job growth and incomes, will make for a receptive audience to the Democratic Party's anti-oil initiatives/legislation (which is no doubt in the offing) in the coming Presidential election.

"To every action there is an equal and opposite reaction." -- Sir Isaac Newton's Third Law of Motion

Generally higher corporate taxes and reduced tax breaks for Big Oil are inevitable in the aftermath of a possible Democratic Presidential win, and even the specter of a windfall profit tax on the oil companies cannot be dismissed.

The Democratic Party's negative view toward the oil industry poses a significant threat to energy stocks, but the threat is currently being ignored in the face of the parabolic rise in the prices of energy products.

For now.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.