Gov. Sarah Palin is a rising political star in Alaska, with an 84% approval rating. A strong advocate of opening her state to more oil drilling, she recently spoke with IBD. IBD: Alaska was bought by the U.S. from Russia in 1867 specifically to ensure a supply of natural resources. How do Alaskans feel about the opposition from politicians representing the lower 48 to drilling for oil there? Palin: Alaskans are frustrated because there is opposition in Congress to developing our vast amount of natural resources. We want to contribute more to the rest of the United States. We want to help secure the United States, and help us get off this reliance of foreign sources of energy. It's a very nonsensical position we're in right now. We send President Bush and Secretary (of Energy Sam) Bodman overseas to ask the Saudis to ramp up production of crude oil so that hungry markets in America can be fed, (and) your sister state in Alaska has those resources. But these lands are locked up by Congress, and we are not allowed to drill to the degree America needs the development. When we became a state 50 years ago, we struck a deal with the federal government where we said, "Let us in a union where we will be as self-sufficient as possible." And the federal government said, "Come in, you'll be our 49th state, and you'll do it by developing your God-given resources." Fifty years later . . . we're living up to our end of the bargain, and now we need the rest of the U.S. to live up to their end of the bargain, to lead America toward energy independence. Alaska should be the leader of an energy policy that gets us there. – Investors Business Daily
Dominant Social Theme: New US republican candidate for president is frustrated by federal government energy regs.
Free-Market Analysis: In this Investors Business Daily article written in July before Palin was picked as US Senator John McCain's VP candidate, the soon-to-be nominee expresses considerable frustration about the "nonsensical" position of the federal government as regards drilling in the US, specifically in Canada. At the same time she also makes the point that we've been making for some time about the strange way that the US in general pursues its energy policy.
We send President Bush and Secretary (of Energy Sam) Bodman overseas to ask the Saudis to ramp up production of crude oil so that hungry markets in America can be fed, (and) your sister state in Alaska has those resources. But these lands are locked up by Congress, and we are not allowed to drill to the degree America needs the development.
This is indeed true; American leaders have paid a good deal more attention to the Middle East and to the funny little countries around Russia than they have to their own "back yard." For Palin, the cause and cure is obvious – get the federal government out of the business of deciding where and when to drill. She says later in the interview: "Shell is up here wanting to drill offshore, but they've been fighting various environmental groups through the 9th Circuit Court and are running into very fierce pushback. In this area, Congress could help us with the development and bring those sources of energy to market quicker than ANWR."
Agreed! It is too bad that Big Oil's Shell is fighting for the right to drill in ANWR. But is it so clear as that? We think not, as you may know, if you are a regular reader. Our suspicions are raised by articles such as this, below (guest editorial, actually), that appeared fairly recently in the Colorado-based "Daily Camera" online about Conoco Philips:
Who would have thought oil would seep its way into our green backyard? ConocoPhillips' purchase of the former StorageTek campus in Louisville is proving to be one of the more dramatic changes in our green community. The Houston-based company will tear down most of the buildings on the 432-acre campus to build a global training center and global technology center, which will teach employees from more than 40 countries. The company made the $58.5 million purchase in January from Sun Microsystems, which is leasing the campus until the end of 2008 when development will begin for ConocoPhillips. ConocoPhillips is the powerhouse that will put Colorado in the lead for alternative renewable energy sources with the development of the new training campus that will have a high economic impact, especially in the Louisville community. It is a great addition to the area. … ConocoPhillips is committed to contributing to renewable energy and carbon-fuel recovery. Its investment in renewable energy in 2007 was $150 million. … It will certainly provide flexibility and alternatives for the ever-changing energy market. ConocoPhillips' move also will establish Colorado as leading state for renewable energy. It will further legislation to require energy alternatives and support Colorado's $7 million dollar clean energy fund. Gov. Bill Ritter stated at a news conference announcing the deal, "They are building a bridge to the future by investing in new, cleaner technologies and in renewable energy." Environmentalists, businesses, lawmakers and residents alike will be pleased with the changes big oil-tycoons, such as ConocoPhillips has made with their advanced efforts in the Green Movement.
Is this an aberration? And if not aberrant, then at least ironic? ConocoPhillips is not just setting up shop to help find ways to create renewable energy. According to the author, "It will further legislation to require energy alternatives and support Colorado's $7 million clear energy fund." That;s right. ConocoPhililips would seem to be funding the same sort of bureaucratic inertia – on a state level, anyway – that makes it impossible to drill in ANWR. Why would ConocoPhillips do such a thing? Hm-mm, we may have an answer to offer in our conclusion. But as long as we're asking questions, here's another odd factoid: Big Oil has given more money to presidential candidate Barack Obama than John McCain:
Much has been made of Barack Obama's TV ad this week that accuses John McCain of being "in the pocket" of the oil industry, and yesterday the Democratic Party launched a website pairing McCain and Exxon Mobil as running-mates. While McCain has raised considerably more money from this unpopular industry, CRP was surprised to notice that it's actually Obama who has received more from the pockets of employees at several of Big Oil's biggest and most recognizable companies. Tallying contributions by employees in the industry and their families, we found that Exxon, Chevron and BP have all contributed more money to Obama than to McCain. Through June, Exxon employees have given Obama $42,100 to McCain's $35,166. Chevron favors Obama $35,157 to $28,500, and Obama edges out McCain with BP $16,046 vs. $11,500. – OpenSecrets.org
What's up with that? As the kids would say. We thought that Big Oil (along with many employees) was "‘agin" those wacky Democrats and their environmental rules and regulations After all, didn't House Speaker Nancy Pelosi tell a group of pro-offshore drilling demonstrators in Denver recently that she would like to "drill your brains."
No, Democrats are certainly seen as anti Big Oil and pro the environment. So one can be forgiven for wondering just what is going on when more Big Oil donations go to Obama than McCain. (Note: It's not only employee donations. To date, Big Oil companies themselves have in several cases contributed more to Obama than McCain.) And also why one of the biggest oil companies in the world builds a huge environmental campus in Colorado with the intention of leading the way to more environmental regulations and more alternative energy research.
Millions of words will be written (as hundreds of millions if not billions already have been) analyzing the fight going on in Georgia and Russia over that "scarce" commodity, oil. The New York Times, the Economist, Washington Post, Le Monde, Financial Times, Financial Post, Wall Street Journal, etc. will all weigh in as they already have, analyzing the tensions between Russia, America, the EU – and many other powerful states throughout the world – over "black gold."
As you may know, we won't weigh in. We've already asked, what if oil is a good deal less precious than it is made out to be? And we've returned to this topic because now the vice presidential candidate of the United States has essentially asked the same question. She has stated publicly what others know too, that there is a great deal of untapped oil in Alaska and it cannot be drilled for political reasons.
Of course, Palin has also indicated that companies like Shell are frustrated by not being allowed to drill in ANWR. That may be. But it would seem that Big Oil is not quite so frustrated over the general regulatory situation as one might expect. Could it be that Big Oil does not really want to drill in America, or at least not in the lower 48? Is this why Big Oil seeks to support yet more energy regulation and "alternative" energy production that – like ethanol – prove to be boondoggles when implemented?
Bottom line: Investors are sucked into the ‘oil is scarce/peak oil" meme at their peril. Many who have perhaps participated in the oil price boom of the past year are now discovering this as oil prices now deflate rapidly. Sure, they may go back up again. But perhaps these prices have less to do with fundamental supply and demand than with the impact of political, regulatory and military events. Don't take our word for it. Ask Governor Palin.