Presidential Oil Lies

I took Gingrich to task earlier this month for his claiming, “There is no Peak Oil.”

Dear reader, in this election year, the lies are already flying fast and hard.

And while the fibs cover many topics, the myths about energy are most material to our goals here…

No matter which side you lean toward personally, distortion of the truth from either side is detrimental to your bottom line.

Here are some of the falsehoods I’ve heard — and how you can sidestep them to maximize your energy investments.

Lie #1: Gingrich’s Return to $2.50 Gas

This one is such a whopper that even Gingrich supporters can’t support it.

Jack Gerard, head of the powerful American Petroleum Institute lobby, said he’s thrilled with the sentiment, but wouldn’t go as far as making price predictions.

The Brookings Institution was more combative. Charles Ebinger, director of its Energy Security Initiative, said outright that approving the Keystone Pipeline would have “no immediate impact” on gas prices, as Newt asserts.

He added the real problem with gas prices is domestic refining capacity, stating: “We’re not going to go back to $2.50 gasoline for a significant time, if ever. Growing demand elsewhere and even in the U.S. if we really came roaring back with the economy getting hot again, then we’d see upward pressure on gasoline prices rather than downward pressure.”

But Chief Oil Price Information Service Analyst Tom Kloza had the best quip about Gingrich’s proposed return to $2.50 gas: “It’s very possible — if we plunge ourselves into a recession.”

Indeed, only another major recession could create enough demand destruction to erode gas prices that much.

It’s oil’s price that leads gas prices.

Unless you can curtail demand growth in China, India, and Brazil while spontaneously combusting peace in the Middle East, you can’t control oil prices.

And as you’re about to see, increased production can only go so far to combat prices.

At the end of the day, the market is in control. And try as they may, neither side controls that… yet.

Lie #2: Obama Is Stopping Oil Production

You’ve heard this one from many of the opposition candidates.

Santorum has said, “This president, systematically, is doing everything he can to raise the price of energy in this country. He’s shutting down all sorts of opportunities for us to drill for oil.”

Gingrich has said Obama is “anti-oil drilling” and under his leadership “because he is so anti-American energy, we actually had a 40 percent reduction in the development of oil offshore.”

Romney has noted that Obama has a “none of the above” approach to American energy and “holds off” development of our natural gas and oil.

For starters, as the Associated Press has pointed out, the 40 percent reduction in offshore oil is outright false. Newt lifted that number from an EIA report that has been retracted because it was incorrect.

Here are the correct production figures for Federal waters in the Gulf in million barrels per day:

There are the numbers, plain as day.

Production went up in the Gulf during Bush’s first three years, then fell sharply from 2005 through 2008.

In 2009 and 2010, Obama’s first two years, oil production in the Gulf of Mexico grew by 488,000 barrels per day. The 1.64 million barrels per day produced there in 2010 is the highest number on record.

So to conclude this section, Gulf oil production fell 384,000 barrels per day — from 1.536 million in 2001 to 1.152 million in 2008 — after eight years of Republican presidential leadership.

In Obama’s first two years, production grew by almost half a million barrels per day in that same region.

In my lexicon, ‘record production’ and ‘anti-American energy’ are not synonymous.

How about when it comes to total U.S. production?

Let’s use the same style table with data from the EIA, this time in billions of barrels per year:

That data polishes this bald-faced lie to a brilliant luster.

Production was down every single year from 2000 through 2008.

And what happened in 2009 and 2010?

Like with the Gulf, production once again started to rise dramatically.

The reality and the rhetoric just don’t match up.

I Don’t Care Who Wins

You see, when it comes to investing, I don’t care who wins the presidency.

I know that at the end of the day, the U.S. president is hardly more than a figurehead. It’s the market that dictates the ebb and flow of supply, demand, and prices — not one man.

It’s just as naïve to think Obama is single-handedly responsible for increasing domestic oil production as it is to think Gingrich can bring back $2.50 gasoline.

Obama was blessed with the advent of shale technology.

And that’s exactly the point here: It’s the market, not the man.

Both sides will try to place blame and claim success. And both sides will bend the truth. (Solyndra, Ener1, or Beacon, anyone?)

I never made any money listening to politicians. I have made money wading through their rhetoric, checking it with facts, analyzing market data, and anticipating what will happen next.

Remember the “Drill, baby, drill” slogan of 2008?

Well, they lost — and we’re drilling to the tune of record production…

Not because anyone said to, but because the market necessitated it.

Believe what the market is telling you, not someone running for office.

Call it like you see it,

Nick Hodge

@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street’s Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor’s page.

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