EIA Predicts Lower Oil Imports
Research for Online Investors

by John Dalt

12/14/09

The Energy Information Agency (EIA) issued a press release with this headline,

EIA Energy Outlook Projects Moderate Growth in U.S. Energy Consumption, Greater Use of Renewables, and Reduced Oil and Natural Gas Imports

That sounds impressive, what really caught my attention was “reduced oil…imports.”  The EIA predicates this statement on a big wish, “ U.S. crude oil production increases from 5 million barrels per day in 2008 to over 6 million barrels per day in 2027 and remains at just over 6 million barrels per day through 2035. Growth in crude oil production results from increases in offshore production and in onshore production using enhanced oil recovery techniques.”   I amazes me that they can predict more offshore production, when the government will not open the most productive areas for exploration.

The assumption seems to be we will grow the economy in the next 25 years while reducing oil imports and increasing domestic production by 17%!  EIA Administrator Richard Newell adds the caveat, "However, assuming no new policies, fossil fuels would still provide about 78 percent of all the energy used in 2035."

After our article Friday on natural gas, imagine the surprise this morning when Exxon Mobil (XOM) announced an all-stock deal valued at $31 billion dollars, for XTO Energy (XTO).  XTO is a natural gas play to increase XOM’s footprint in unconventional exploration.

XTO shareholders will receive .7098 shares of XOM stock for each share of XTO they own.  XOM will also assume $10 billion in debt.  This has valued XTO at $51.69 per share based on Friday’s closing price.

As we look to the end of the year, and taxes, let’s apprise where we have been, where we are, and where we are going.

Prior to the 1986 tax simplification act, top tax rates were 70%, but you had to be asleep to pay it.  There were many deductions top earners could take to lower the actual taxes they paid.  After 1986, top tax rates were 28% with most deductions gone, but many thought at the time, this was just a ruse to dump the deductions and raise the rates later.  The top tax rate was raised to 39.6% in 2000, and then dropped to 35% under the Bush tax cuts.

In 2011 the Bush tax cuts expire, and rates will go back up, along with capital gains taxes that move up to 20% from 15%.  Dividends will be taxed as ordinary income rather than the present 15%, and the inheritance tax will be back with lower exemptions.

What is in store for us, the great unwashed?  This year’s deficit is more than $1.7 trillion, more than the accumulated debt for the first 200 years of our country.  Government debt will be over 75% of GDP by 2019  We can expect higher taxes across the board, at least for the remaining 60% of the population that still pays taxes.  Taxes on specific sectors for ‘bad behavior’ will be enacted (read coal mining and oil exploration).  Tax breaks for ‘good behavior’ will be given out (read alternative energy investments).  Washington is going to look in all the wrong places, rather than cut spending.

I do not see how we can avoid massive inflation; it is the one macro-economic condition that can happen to let the government pay their bills and does not require a vote.  Buy Gold, silver, natural resources.

As mentioned before, I am reading Warren Buffett’s biography, "Snowball."  I put together a little list of Buffet quotes, and put them in the Investor Resources section, check them out.  I will update occasionally.  Send me your favorite if you don’t find it on my list.

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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