Blame It On Rio: The President Goes Petro Hunting In Brazil

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A good President might try to correct three of America’s biggest problems: intractable unemployment, America’s increasing dependency on foreign oil and a monstrous trade deficit. Yet none not one of these issues concerned President Barack Obama as he traveled throughout Latin America and launched another war upon a Middle Eastern nation.

Libya is ground zero for American air and sea power. Libya has more than 40 billion barrels of crude oil reserves and before its civil war was producing 1.7 million barrels of oil per day, roughly 2 percent of the world’s daily oil output.

No longer can other oil exporters replace shrinking Libyan production. That makes the crisis in Libya not just a potential military one but an economic one as well.

Barack’s Brazilian Solution
Apparently President Barack Obama does not think American roughnecks can be trusted. Boring at vast oil veins under the Gulf of Mexico has been suspended by the President. Now he has made his case for offshore oil development much further south, off the coast of Brazil.

Obama made his proposal while meeting with Brazilian President Dilma Rousseff. The Tupi oil field alone, which lies off Rio de Janeiro in the Santos Basin, has a potential deepwater reserve of 100 billion barrels.

Of course, the Gulf of Mexico has vast reserves, too. But like a good Democrat, Obama has added a middleman, and a foreign one at that.

The prospect of drilling for oil off the coast of Brazil rather than the coastal waters of the Gulf of Mexico seemed to have Obama tickled pink. 

“By some estimates, the oil you recently discovered off the shores of Brazil could amount to twice the reserves we have in the United States,” Obama said. “We want to work with you. We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers.”

The “you” Obama was talking about is one of the largest corporations in the Americas—Brazil’s state-owned Petrobras oil company. Obama previously offered the company a $2 billion loan guarantee to help develop the oil field, but to date, Petrobras has not given an answer.

While the President has embraced oil production off Brazil, operations in the Gulf of Mexico and off the coast of Alaska are at a standstill because of Obama’s “permitorium” on drilling. The only exceptions being three Gulf permits granted to operations which previously had permits and one allowing for new exploration (which will probably soon get slammed by a lawsuit).

Brazilian oil only makes sense if the United States didn’t have reserves. But the nation does. Still the President wants to invest billions of U.S. tax dollars for oil off Brazil.

And let’s not forget the unemployment problem. Obama promised to get America back to work during his primary run for the Presidency three years ago. But the jobless situation has not improved. According to The Washington Post, real unemployment in the United States may be as high as 16 percent.

Never mind that American rig operators go without work as do a multitude of small businesses that support them.

Fill’er Up With Corn And Check The Oil
Pleasing the Greens seems more important to Obama than getting America back on its feet. Of course, pleasing the Greens won’t produce much work for Americans and will only make the United States more dependent on oil imports. And oh yes, it will add to America’s massive trade deficit which has been weakening the U.S. dollar and therefore aggravating inflation.

Little wonder that on March 25, The Canada Free Press gave its opinion on Obama’s aspirations for Brazil:

“If Obama seems to be taking a wrecking ball to domestic oil production while increasing our reliance on oil from unstable foreign regimes, he at least partially explained his reasoning while in Brazil. ‘In the United States, we’ve jump-started a clean energy industry, and we’ll soon have the capacity to produce 40 percent of the world’s advanced batteries.’

“Of course, ‘jump-started’ is Washington speak [SIC] for subsidized. So in essence, the President is more than happy to trade our energy security and tank our economy to lead the world in the production of batteries.”

The Canada Free Press concluded that nobody can make, “stuff like this up and if it wasn’t so seriously stupid, it might be hilariously funny.”

Obama seems locked into remaking America into a Green nation whether it makes economic sense or not. Before his trip to Brazil, The Economist came out with its Feb. 28 issue, the cover of which said: “Blood and oil.” Within this issue is a Special Report, The Future of Food.

Food and energy have always been interconnected because it takes one to produce the other. Despite dire warnings of the surging global demand for food over the next two decades the Obama administration is willing to grow corn rather than drill for oil. 

While China aims to make 5 percent of its gasoline supply ethanol by 2020, Obama is far more ambitious, demanding that 30 percent of U.S. gasoline be derived from ethanol or alcohol by 2030.

Today ethanol only accounts for 8 percent of America’s transportation fuel yet takes up to 40 percent of the nation’s corn acreage. The Economist warns that if Obama’s 2030 deadline for clean gasoline is met, it will inflate food prices by an additional 15 to 40 percent.

If Obama had read this issue of The Economist, he might have spent less time talking about drilling for Brazilian offshore oil and spent more time learning the truth about ethanol. 

Brazil has no special advantage in finding crude but does have a tremendous advantage in making ethanol. The Economist points out that Brazil generates its ethanol, not from corn but from sugarcane, and the result is that it harvests eight units of energy for every one unit spent. In the U.S., corn produces one and a half units of energy for every one unit spent. 

Yet Obama is insistent that America grow ethanol, food prices be damned.

According to Peter Brabeck, the CEO of food giant Nestlé, “This is the craziest thing (the United States) is doing.”

I take issue with Brabeck. The Obama administration has been doing so many crazy things when it comes to U.S. energy policies it seems impossible to name just one.

Yours in good times and bad,

John Myers
Editor, Myers’ Energy & Gold Report

John Myers

is editor of Myers’ Energy and Gold Report. The son of C.V. Myers, the original publisher of Oilweek Magazine, John has worked with two of the world’s largest investment publishers, Phillips and Agora. He was the original editor for Outstanding Investments and has more than 20 years experience as an investment writer. John is a graduate of the University of Calgary. He has worked for Prudential Securities in Spokane, Wash., as a registered investment advisor. His office location in Calgary, Alberta, is just minutes away from the headquarters of some of the biggest players in today’s energy markets. This gives him personal access to everyone from oil CEOs to roughnecks, where he learns secrets from oil insiders he passes on to his subscribers. Plus, during his years in Spokane he cultivated a network of relationships with mining insiders in Idaho, Oregon and Washington.