Green Loses to Greenback

September 2, 2009 at 4:00 am Leave a comment

Dollar

We are currently in a political environment that sees no gray, but rather only sharp contrasts in black and white. As it turns out, these three colors are not the winners or losers – the winner is the almighty “greenback” and the loser is the “green” movement. The so-called environmentally friendly Obama administration recently approved the Alberta Clipper project – a 1,000 mile pipeline being built by Endbridge Energy that is designed to carry 800,000 barrels of fuel from Canada to the U.S.

As our reliance on what New York Times journalist Tom Friedman calls the “petro dictators” has not gone away, the recent decision seems very rational in securing supplies from friendlier neighbors. However, environmental constituents like the Sierra Club feel differently:

“At a time when concern is growing about the national security threat posted by global warming, it doesn’t make sense to open our gates to one of the dirtiest fuels on earth.”
-Carl Pope (Executive Director of the Sierra Club)

 

As far as I’m concerned, we still import about 2/3 of our oil and until alternative energies become more cost effective, we have little choice but to explore a multitude of strategic supply agreements. Canada is a neighbor and ally, therefore the U.S. should not walk away from any similar future agreement that will bring a stable and reliable source of supply. The scarcity of the critical resource and other commodities is evident by strategic deals and acquisitions being made by China and its government (See previous Investing Caffeine article, “The China Vacuum, Sucking Up Assets”).

 As economic hungry emerging markets seek expansionary policies, I expect to see even more of these international types of deals.

The oil-sands region in the Athabasca region (about the size of Florida) of Alberta holds great promise. If you believe famous oil investor/speculator T. Boone Pickens and other pundits, the oil-sands region holds the equivalent amount of reserves as world supply leader Saudi Arabia – about 250 billion barrels.

 Oil-Sands

I concur with recent comments Financial Times article that says the Endbridge Energy deal meets a number of U.S. strategic interests, including:

“Increasing the diversity of oil supplies for the U.S., amid political tension in many major oil-producing regions; shortening the transportation path for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer.”

 

I am not a believer in damaging our environment for the pure sake of profits, however in this competitive global economy I think we need to seek an aggressive dual-source supply of energy (alternative energy AND traditional petroleum/coal products). The fact of the matter is that we have been pursuing solar, wind, nuclear, and other alternative energy resources for decades with very limited success. More financial resources and subsidies must be thrown at these alternative resource possibilities, while we simultaneously seek strategic supplies like this Canadian oil-sands deal.

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

DISCLOSURE: Sidoxia Capital Management and its clients have direct investment exposure in companies investing in Canadian oil-sand projects (SU) at the time the article was published. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

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