The headline in The New York Times reads "American Energy Policy, Asleep At the Spigot." The rise in old prices could have been prevented to some extent. The question is who is at fault. Describing how out of control crude consumption is in the U.S., the paper writes, "Home to only 4 percent of the world's population, the nation slurps up about a quarter of the planet's oil -- and Americans' daily use is nearly twice the combined consumption of the Chinese and Indians."
Well said, and true. But, the actions described are terribly American and could not, under the current economic and government system, have been prevented.
Oil consumption is not unlike the use of cigarettes or liquor. The government can tell citizens that the behavior is dangerous. It can even raises taxes on the products to remarkable levels. But, it is not willing to legislate limited use of oil. It is not willing to create a "Prohibition" like Congress did when it tried to eliminate drinking. The attempt lasted from 1920 to 1933. Americans drank right through the 13 years.
No matter how bad the oil crisis is now, on the consumption side, the U.S. government is poorly equipped to change the behavior of its citizens unless there is a period of emergency. In WW II, people were willing to go along with restrictions in their use of certain goods and services, like rubber.
With gas over $4 and going higher, the present turmoil has the hallmarks of a grave danger. Perhaps it is time for Congress to pass an "Emergency Gas Act." Nothing short of that is going to change how fossil fuels are consumed.
Douglas A. McIntyre is an editor at 247wallst.com.
One of the most controversial proposals for dropping the price of oil is to allow drilling in protected parklands and in restricted off-shore areas. Since there are deposits of crude and gas in these areas, it is also one of the more sure-fire ways of adding to production.
It now appears that the waters off Florida are among the most promising. According to the AP, "The early activity here stems from a 2006 Congressional compromise that allows drilling on 8.3 million acres more than 125 miles off the Panhandle."
The promise of the Florida coast is both good news and bad, depending which side of the debate one is on. A find of any real significance is likely to be proof of the fact that opening protected lands will yield results.
For the "green" crown, it could mean the the government will be encouraged to drill of near protected beaches. There may even be wells in Yellowstone.
Douglas A. McIntyre is an editor at 247wallst.com.
It's no secret that Talk Radio host extraordinaire Rush Limbaugh has revolutionized the alternative media. With his new contract, it appears that Rush is once again on the cutting edge of societal evolution, and has once again laid down the gauntlet that he is light years ahead of his competition. What's so amazing is that in an era when traditional media is having all kinds of problems, whether it's declining newspaper sales, or declining ratings for the nightly news, the man who sits behind the golden EIB microphone is forging ahead as if nothing is happening.
According to a press release, Limbaugh has signed a long-term contract extension:
Advertiser and affiliate demand is at an all-time high for Mr. Limbaugh. President of Premiere Radio Networks Charlie Rahilly stated, "The Rush Limbaugh Show enjoys an unprecedented platform of radio affiliates. Plus, advertisers harness the intensity of listener engagement -- no one's 'word of mouth' about a product or service delivers more impact than Mr. Limbaugh does. The Premiere team is proud to partner with Mr. Limbaugh deep into the next decade."
Oil bulls were also motivated to hit the buy button after ABC News reported that Israel may attack Iran's nuclear facilities if Iran acquires enough uranium to build a nuclear weapon, citing a Pentagon source who spoke on condition he not be identified.
The other major energy commodities also vaulted higher Tuesday at mid-day on the news. Heating oil rose 8 cents to $3.97 per gallon, unleaded gasoline increased about 5 cents to $3.54 per gallon, and natural gas added 20 cents to $13.55 per million BTUs.
It was only last week that Goldman Sachs (NYSE: GS) caused havoc in the stock market (or at least lead the charge) downgrading Citigroup Inc.(NYSE: C), and General Motors (NYSE: GM) among others, but now they have started to express concern that some of the defense sector stocks may be vulnerable to the next president's ax.
It was only a few weeks ago I posted Chasing Value: General Dynamics & Raytheon: The defense does not rest and things continued to look bright until a few days later, perhaps after the GS behind the scenes warning started to have an impact on the market that the sector took a mysterious swoon -- now I know why.
If Goldman Sachs, one of the few investment houses with any credibility left, makes a move everyone else seems to want to get out of the way.
I have viewed the defense sector favorably this year and will not abandon ship because GS is getting cold feet. They have been rather negative on everything lately and I do not think the (stock) world is coming to an end.
The Bloomberg article notes that while some programs will be cut others will be added. It is all a guessing game as either presidential candidate will want to review the entirety of defense expenditures in a new administration.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GD.
What will it take to break the downward cycle for the U.S. stock market and its economy? Get back to our roots as a country that lives within its means.
The source of the problem is that we have gotten away from the idea of paying only for things we can afford. To close that affordability gap that results from lower income and higher prices, we have borrowed money -- $9.3 trillion in federal debt, a $410 billion federal budget deficit, and $2.5 trillion in consumer borrowing -- which has caused other countries to view the dollar as a distress currency. It's lost 72% of its value since January 2001 -- when it traded at 92 cents to the euro.
Having spent the last two weeks in Europe, that weak currency hurts -- everything seems to be about 50% more expensive there than it is here. Gasoline there is far more expensive than it is in the U.S. -- roughly $9.60 a gallon compared to $4.25 here. And the reason that our stock market is dropping while oil rises is a result of deliberate government policies designed to weaken the dollar and strengthen oil.
It's time to start drilling for oil and natural gas offshore on the east and west coasts. We are wasting our time and our money, and risking our future by not doing so. The energy needs of the United States have made oil our number one import and the biggest factor in our imbalance of trade.
It is not just that oil holds us hostage to the rest of the world. This imbalance of trade means we cannot support ourselves and must borrow from others to get by, and I, for one, have a very hard time with that notion. I prefer independence -- remember that? I think it was an important concept in our founding, way back when.
The imbalance in trade is a mortgage against the future of our children and it is getting worse year after year. The money often goes to foreign governments whose interests are not aligned with ours and they hold us politically and economically captive. Nothing is more shameful than President Bush pleading with Saudi Monarchs to pump more oil.
Sometimes during a crisis the United States rushes toward a solution, only to find that the action was not only not a panacea, it was, in fact, ill-conceived and harmful.
The late British Prime Minister Winston Churchill alluded to this when he noted that, "In the end, America will do the right thing . . . after she's exhausted all other possibilities."
That may very well be the case with corn-based ethanol.
Initially heralded as a renewable fuel that reduces foreign oil imports, it now appears that a powerful coalition is building against corn-based ethanol -- a problematic energy source, in economist Glen Langan's interpretation.
A ' tax dollar not well spent'
The U.S. Government (which means you, the taxpayer) heavily subsidies ethanol from corn production via payments to farmers, Langan said. "The tax dollar is not well spent, either from an environmental standpoint or an energy policy standpoint," he said.
Presumptive Republican presidential candidate John McCain's plan to award a $300 million prize "for the development of a battery package that has the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars " raises many questions.
For one thing, what does he mean by "leapfrog?" Does the McCain car have to be 10?% better? 20% better? or 30% better? Will a marginal improvement suffice? Moreover, who is going to decide whether the goal is met? environmentalists? the automakers? the government? These people can not agree on what we should do to reduce air pollution; I can't imagine the fights that will occur over what constitutes a technological "leap."
McCain wants the car to deliver a power source at 30% of the "current costs." Does that mean costs as of 2008 or whenever this wonder car is ready to be sold to consumers? How does he define "costs?" Is it the total cost of ownership or a reduction in the sticker price or something else entirely? Why limit it to batteries? What about hydrogen fuel cells whose only pollution is water vapor?
In a speech he delivered today, McCain pointed out that "right now we have a hodgepodge of incentives for the purchase of fuel-efficient cars." Indeed, purchasing a hybrid only makes economic sense for the most die-hard of tree huggers. But is the answer to skyrocketing gasoline price to be found in a contest? I am not so sure.
There is a great debate in the halls of Congress, among environmentalists, and within the executive suites of big oil companies. Why not allow protected U.S. lands and offshore areas to be open for drilling of crude? Oil supply is tight. There are huge fields in some of the areas where companies are not allowed to explore.
A similar push and pull has begun over U.S. farmland. With critical crops destroyed by rain, the price of corn is at record levels and rising. The government has a policy to get farmers to set aside land for conservation. Perhaps at this point that is a bad idea.
According to The New York Times, one of the senators from Iowa "urged the Agriculture Department to release tens of thousands of farmers from contracts under which they had promised to set aside huge tracts as natural habitat."
Corn prices are being driven by high demand for ethanol and food poorly balanced against inadequate production. The flooding in the Midwest only makes that worse.
If the U.S. government wants to do everything it can to bring down food and oil inflation, it can set up a "drill anywhere" and "plant anywhere" policy. The streets of New York can be covered with the next wheat harvest. San Francisco Bay can be riddled with oil derricks.
Douglas A. McIntyre is an editor at 247wallst.com.
The Internal Revenue Service is reporting that it still has about 5.2 million tax rebate checks which it cannot send out because the people who should get them have not filed a 2007 tax return. According to a report in USA Today, these citizens only need to fill in a few lines on IRS form 1040A, in order to get their money. The IRS says that veterans and retirees, those who could use the money the most, make up the major portion of the population that has not yet received it's rebates. The IRS expects to issue 124 million rebate payments by year's end. So far, about 76.5 million of those payments have gone out.
Food manufacturers promised Mexico's government on Wednesday they would freeze prices on more than 150 food products to help families cope with the rising cost of food, The Associated Press reported Thursday.
Mexico President Felipe Calderon said prices for goods including beans, canned tuna, fruit juices, coffee, ketchup and canned tomatoes will remain fixed until December 31, 2008, The AP reported. Calderon blamed rising food prices on surging global energy prices, food demand in China, and the use of corn for ethanol production.
Good intention, wrong method
Economist Glen Langan said he agreed with the need for food assistance for Mexico's poor, but disagreed with the mechanism.
"A more effective program would be a larger cash payment or food subsidy to citizens," Langan said. "The pricing mechanism should be kept in place, because it has many benefits. Cash payments or subsidies to poor residents are much more targeted and don't provide a benefit to those who don't need it. [Mexico President] Calderon did announce a monthly subsidy, 120 pesos [$11.60], but it isn't large enough."
The Government Accountability Office has decided that the Air Force has done Boeing (NYSE: BA) dirty. It says that in the bidding process for a new air tanker, the Air Force should not have favored Northrop-Grumman (NYSE:NOC) for the project. NOC won the tanker deal several months ago.
The Wall Street Journal reports that the decision "effectively gives Boeing the chance to recapture its decades-long lock on the business of supplying planes that can refuel other planes in midair." The GAO said the Air Force analysts had made mistakes in some of their evaluation analysis.
The whole matter stinks. Boeing has been able to push its agenda in Washington by lobbying hard to keep jobs for the tanker in the US. The Northrop proposal would have had EADS, the European airplane maker, do some of the work. Several senators got behind the idea that Boeing should get another chance.
Was the GAO influenced by Congress? Who will ever know, but if Boeing, which is the incumbent for supplying the military tankers, can get into the position to bid again, something seems a bit off.
Douglas A. McIntyre is an editor at 247wallst.com.
Boeing may abandon plans to sell its aerial refueling tanker internationally if it loses its protest of a U.S. Air Force decision to buy $40 billion worth of tankers from a competitor, The Wall Street Journalreported Wednesday [subscription].
Boeing's Mark McGraw, the executive in charge of the program, told The Journal that Boeing had counted on the Pentagon to provide enough volume to make an international tanker business viable.
In February, Northrop Grumman (NYSE: NOC) and partner European Aeronautic, Defence & Space (EADS), parent of Airbus, beat out Boeing, the Air Force's only supplier of the aircraft for half a century; the Air Force recently announced that it continues to support that decision. Boeing protested the award to the Government Accountability Office, which must make its recommendation to the Pentagon by Thursday.
Boeing's (NYSE: BA) shares were virtually unchanged on the news in Wednesday mid-day trading, gaining eight cents to $74.43. Northrop Grumman rose $1.03 to $72.09 and EADS fell 46 euro cents to 13.57 euros on the Paris Exchange.
After hitting a one-year low of $19.69 in November, the stock hit a one-year high of $25.85 on Monday. This morning, SPLS opened at $24.76. So far today the stock has hit a low of $24.44 and a high of $24.98. As of 11:00, SPLS is trading at $24.54, down $0.57 (-2.3%). The chart for SPLS looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $27.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 16.3% return in three months as long as SPLS is below $27.50 at September expiration. Staples would have to rise by more than 11% before we would start to lose money. Learn more about this type of trade here.
One of the most controversial proposals for dropping the price of oil is to allow drilling in protected parklands and in restricted off-shore areas. Since there are deposits of crude and gas in these areas, it is also one of the more sure-fire ways of adding to production.
Oil prices rose above $142 on a lowered supply estimate and tension between Israel and Iran over Iran's nuclear program. 
It was only last week that 
What will it take to break the downward cycle for the U.S. stock market and its economy? Get back to our roots as a country that lives within its means. 
It's time to start drilling for oil and natural gas offshore on the east and west coasts. We are wasting our time and our money, and risking our future by not doing so. The energy needs of the United States have made oil our number one import and the biggest factor in our imbalance of trade.
Sometimes during a crisis the United States rushes toward a solution, only to find that the action was not only not a panacea, it was, in fact, ill-conceived and harmful. 
Presumptive Republican presidential candidate John McCain's 
The Internal Revenue Service is reporting that it still has about 5.2 million tax rebate checks which it cannot send out because the people who should get them have not filed a 2007 tax return. According to 
Food manufacturers promised Mexico's government on Wednesday they would freeze prices on more than 150 food products to help families cope with the rising cost of food, 
Boeing may abandon plans to sell its aerial refueling tanker internationally if it loses its protest of a U.S. Air Force decision to buy $40 billion worth of tankers from a competitor, 
The week in preview: New quarter earnings kick-off
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
