Drill, Pебенка, Drill
Research for Online Investors

by John Dalt

2/15/11

The New York Times had an interesting article today on Russia and Arctic oil exploration.  While U.S. regulators are sucking their collective thumbs over offshore drilling, the Russians just signed a deal with BP to drill in the Arctic.  Russia has surpassed Saudi Arabia as the world’s biggest oil producer, and intends to stay in the lead.  Crude oil sales make up 60% of all of Russia’s exports.

Vladimir Putin is Russia’s Prime Minister and believes BP is the safest company to do the drilling in the Arctic, having learned their lesson in the Gulf of Mexico.  Putin told reporters that “One beaten man is worth two unbeaten men.”  Russia controls more acres for prospective drilling in the Arctic than the U.S. and Canada combined.

The U.S. Geological Survey estimates that the Arctic holds one-fifth of the world’s undiscovered oil and natural gas.  A report in 2009 from the U.S. Energy Department suggests that 43 out of 61 ‘significant’ oil and gas fields are in Russian territory.  Russian deposits are believed to be rich in natural gas potential, with crude oil more likely under U.S. and Canadian land.

Norway and Greenland are also opening their Arctic lands for drilling.  All of this while the U.S. Interior Department continues to stonewall deep water drilling permits for the Gulf of Mexico.  They have been charged with Contempt by a Federal Judge in Louisiana, but still no drilling.  We look forward to the Judge taking away the permit process and issuing them from the bench, or issuing an arrest warrant for Secretary of the Interior Ken Salazar.  For more on the case against the Interior Department read Duplicitous Obama from earlier this month.

The fallout over the president’s budget swings into high gear today, with many weighing in on the effort out of the White House.  President Obama held a one-hour news conference this morning and was peppered with questions.  One has to say after watching, “He is a good pol.”  No matter how hard the reporters tried to corner him, he worked his way out of any corners.  It is difficult to defend the budget and suggest that it makes hard choices when the budget grows spending by 49% over the next ten years.

The President’s Budget Director, Jacob Lew, says the budget will save $1.1 trillion dollars over the next ten years.  The hard choice is that higher taxes make up almost one-third of the “savings” over the next ten years.  The budget “locks” in spending at more than 22.3% of the nation’s GDP for the next ten years.  The non-defense portion of the budget has never been this high for this long in our nation’s history.

The President’s budget locks in deficits of 3% or higher for the next ten years.  The difficulty is the debt and deficits are so high that freezing spending is not enough.  The economy will not “grow us out” of the present problem.  Cuts have to be made.

According to economist Brian Wesbury, “Claiming budget savings by freezing spending at today’s levels is like an alcoholic who says he’s sober because he’ll never drink more than yesterday’s bender. Trouble is, this alcoholic doesn’t even pay his own tab.”

Past Egyptian President Hosni Mubarak has not been seen since he vacated the office early Friday morning.  Some believe, as we reported, that the military carried out a ‘soft’ coup. A military source told Reuters that Mubarak was ‘breathing.’  Since taking power, the military has dissolved parliament and suspended the constitution.  Mubarak had scheduled elections for September, but now it seems the military feels it may take up to a year before elections can be held.

Egyptian banks are closed for the next two days. The Muslim Brotherhood has asked that all political prisoners be released from prison and Sharia Law be instituted in the country. It will be interesting to see how Facebook and Twitter stack up against Sharia Law. The Iranians have an answer, executions.

The market continues on low volume.  It seems like the quiet before the storm.

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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