Asleep at the Wheel
Research for Online Investors

by John Dalt

2/23/11

“We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse.”  That quote is from Jeremy Leggett of the U.K. Industry Taskforce on Peak Oil and Energy Security.  He is not talking about the present situation, but the long term outlook for crude oil supply.

For the past few days we have wondered, “When will the Interior Department permit a deep-water oil well drilling plan?”  The administration is ‘Asleep at the Wheel.’  Where does oil come from if we don’t discover it?  The cynic in me wonders if the administration intends to “starve” the U.S. for energy by cutting production through limiting exploration and increasing regulations on coal miners.

What better way to bring us to our knees than increase the price of all ‘dirty’ forms of energy then substitute ‘research’ and expensive alternative forms of clean energy.  Simply by doing nothing the administration gets what they want, high energy prices and subsidies for ‘clean’ energy.

I was gratified to see that the House of Representatives is going to hold hearings on the lack of permits for deep-water drilling in the Gulf of Mexico.  Interior Secretary Ken Salazar will testify on March 3 before the Natural Resources Committee.  According to an article on the Dow Jones newswire, the administration has lifted the ‘moratorium on new offshore permits in deep water but has yet to green-light a new deep-water project and has slowed the pace of permits for shallow water drilling.”

The administration believes they need to hire more expert staff and wants to increase the inspection fees for drillers.  We wrote three weeks ago in Duplicitous Obama that a Federal Judge cited the administration for contempt of his order to lift the moratorium on deep-water permits.  The judge declared the “enhanced drilling safety rules” violated federal laws.  Where are we three weeks later?  Still no permits, no deep-water drilling, and crude oil is now over $100 per barrel.

Federal Judge Martin Feldman ordered the Interior Department to act on a permit application from Ensco Offshore Co. within 30 days and “simultaneously report to the Court its compliance.”  The permit from Ensco has been under review by the government for four months.

In the wake of the Judge Feldman’s ruling, Michael Bromwich told the Houston Chronicle that deep-water permits could be issued in the next several weeks.  Michael Bromwich is the director of the Bureau of Ocean Energy Management, Regulation and Enforcement office in the Interior Department.  Bromwich blamed permitting delays on department field personnel that are afraid of criminal liability if they make decisions.  Bromwich is a criminal attorney.  Would you believe him?

Stay long with exploration and production natural resource companies.  In our long-term portfolio we own XOM, KMP, LINE, ARLP, SU, and HGT.  There should be good future profits in oil service companies, if they don’t depend on U.S. off-shore permits.

To the mailbag:
Thanks, John. My portfolio is "movin' on up!" Plus, I'm learning a lot trading with you which I very much appreciate.---Buy, Sell, Hold subscriber G.C.

John’s reply:  It is always great to hear from happy customers.  We take our responsibility to help you increase your wealth seriously.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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