Only once have I looked down the barrel of a gun. I can tell you it was damn disconcerting. It happened 25 years ago. The automatic rifles that were drawn on me then are pointed at America today. Yet President Barack Obama refuses to acknowledge that America is facing Middle Eastern guns.
In 1986, I traveled to Geneva to attend an emergency OPEC meeting. My father Vernon was in his early 70s but had lost none of the drive that shaped his youth as a reporter, which led him to found Oil Week Magazine and Myers Finance & Energy (MFE).
Vern was old school. While he had not changed from his reporting days, the world had. I got a sense of that when we pulled up to the hotel decked with machine gun-toting policemen.
My dad either didn’t notice the tight security at the hotel or he simply didn’t care. He asked the desk clerk, “Where’s the meeting?”
That was a tough question for anyone, never mind someone not familiar with English.
“Are you looking for the OPEC meeting? That is on the penthouse,” he responded.
“Thanks,” mumbled my dad, as he marched toward the elevator. As I crept behind, I heard the clerk say: “Sir, you are not allowed up there!”
Inside the elevator my dad said, “Penthouse!”
The elevator operator protested until my dad spelled it out: “We are the press.”
The operator reluctantly pushed the button. As our elevator climbed higher, I got a sinking feeling in my stomach. I understood we were about to walk in unannounced on some of the world’s biggest power brokers.
The elevator stopped. The doors slid open and before you could say, “Sheik Your Booty,” four machine guns were aimed at our heads. There stood four of the biggest men I have ever seen, each wearing a turban and a bulletproof vest.
Questions were barked out in Arabic. My dad was led down a hall while a single guard stood over me. I must have put him at ease; because after a few minutes, he shouldered his gun and offered me a cigarette.
Our entrance was like the Keystone Kops, but luck would have it that Vern got his story. Down the hall was a member of the Saudi delegation who remembered my dad from a 1962 trip to the Kingdom. While I stood before the guard, Vern was talking to his old Saudi acquaintance. He learned that Saudi Arabia was going to open up its spigots. Over the next several months, oil prices began to fall dramatically.
An Energy Crisis Waiting to Explode
That OPEC no longer exists. The de facto leader of OPEC today is militant Iran, whose influence grows with each passing month. Whether we know it or not, America is staring into the guns of OPEC.
A recent simulation called Securing America’s Future Energy declared that the United States lacks effective energy policy responses in the event of another OPEC embargo. The Heritage Foundation, which is made up of current and former government officials and diplomats, reported that protracted turmoil in principal OPEC countries has the potential to cause a sharp decline in oil production and an acute price spike.
The crisis game they played was called Oil ShockWave, and it took place in The Ritz-Carlton ballroom a stone’s throw from the White House. Players included George Bush’s former deputy secretary of state John Negroponte, a former official of Jimmy Carter’s Administration and a former Shell Oil chief executive. They participated as make-believe cabinet officials. At the conclusion of the simulation, participants acknowledged America had become hostage to its need for oil, yet they couldn’t quite seem to break away.
“We are reaping the harvest of our dependence on petroleum and the fact that the countries that produce it are either unstable or hostile to our interests,” declared Stephen Hadley, who reprised his real-life role as Bush’s national security adviser. “How did we let this happen when we’ve known we’ve been dependent on oil for 20 years?”
Former Shell Oil chief executive officer John Hofmeister played the role of energy secretary in the exercise. He gave assurances about U.S. domestic supply. Not one person called for an accelerated transition to renewable energies. According to one participant, nobody even whispered the words “climate change.”
Hofmeister said: “The most powerful message that we have is that the United States of America has more oil than any other country in the world that we know of. We have simply been holding ourselves back from producing that oil. I think it is time to really get the message to Congress that it is time to start producing.”
My question is: When is Obama going to wake up to the impending crisis? It may already be too late, and if Muslim guns turn on the Saudi Royal family itself, it will be far too late — not just for the House of Saud for but the United States.
Ari Fleischer, the White House press secretary under George W. Bush, said: “The president has to do something bold. He has a real challenge to his leadership.”
Fleischer’s conclusion is that Obama should announce the Federal government is going to open up every acre of land for oil drilling that was previously declared off-limits.
After 2½ years of disappointment, I think my odds of winning the SuperLotto are better than the chances that Obama will wake up to the petroleum peril America is facing. That is bad news for the country, which is staring down the barrel of $8 per gallon gasoline prices.
This summer the threat of soaring energy costs has been swept under the rug by a President and a Congress that want us to be mesmerized by the “debt crisis.” I believe a compromise on the debt ceiling will happen. While nobody may like it, it will do enough to temporarily placate dollar holders. Meanwhile, the clock continues to count down toward zero hour when energy prices explode.
As an investor, you should seek out blue chip petroleum companies whose reserves are in North America. Natural gas is extremely underpriced right now. Besides being abundant, it has the added benefit of pleasing the Greens because it is cleaner than coal and oil.
According to a report from International Energy Agency, natural gas is poised for a golden age — with at least a 50 percent spike in demand by 2035.
The upswing in natural gas comes from several factors. First, there will be a continued focus on energy sources that have lower carbon-emission levels. What’s more, demand from China, India and other emerging economies should remain strong.
In addition, as seen with the Fukushima nuclear implosion in Japan, natural gas looks fairly safe. Germany recently announced that it will shut down 17 of its nuclear power plants.
Action to take: Buy EOG Resources (NYSE: EOG. $101). The company is a big producer of natural gas in North America. But it also has operations in China, so it can take advantage of the resilient Asian economy.
EOG is on the cutting edge of finding and developing unconventional sources of natural gas, especially methane extracted from shale.
EOG has proven reserves of 11.7 trillion cubic feet and not much debt. That combination allows EOG to finance further exploration, while developing new technologies to extract gas. EOG could be a takeover target by one of the majors within the next year.
Yours in good times and bad,
Editor, Myers’ Energy & Gold Report