Socialism Hits the Oil Industry

Keith Kohl

Written By Keith Kohl

Posted May 16, 2010

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read stories from Energy and Capital and sister publications.

Socialism just hit the oil industry.

And I’m not referring to Venezuelan President Chavez wresting oil fields away from foreign companies…

No. This time, it’s hitting much closer to home.

Obama recently took his plan to Congress. In order to pay for the clean-up efforts in the Gulf of Mexico, he’s proposing a penny tax on oil companies.

Although a penny tax seems trivial, it’s a foot in the door for Obama.

Don’t get me wrong, I’m not trying to trivialize the situation in any way. But if I’m not mistaken, BP has already stated they would pay for all legitimate claims. (I’d like to point out that the wording alone makes me cringe.)

If nothing else, we should be promoting more onshore activity — not penalizing them for the offshore spill.

Let the Blame Game Begin

And while Obama attempts to pass the bill to all U.S. oil companies, the blame game in Washington has already started to make headlines.

At the front of the public stage are three companies directly involved with the offshore accident: BP, Transocean, and Haliburton.

Let the finger pointing begin… as if we didn’t already expect an endless circle of blame.

BP head honcho Lamar McKay was quick to point out that Transocean was hired to drill the well and therefore had responsibility.

Yet Transocean wasn’t going down without a fight… When in doubt, just fire the blame right back.

Transocean claims that BP was making the calls on the rig; their point is that the operator (BP) is the one ultimately in charge of the project.

Still, Haliburton might hold the trump card. Since BP is blaming Transocean and Transocean is blaming BP, this makes things easy for Haliburton: blame both BP and Transocean.

According to Haliburton, they were under Transocean orders.

What are the other consequences of the BP oil spill, you ask?

  • For a moment, put aside the amount of money ultimately spent on the cleanup. That figure changes nearly every day and everyone seems to be predicting a different amount. So far, I’ve heard some analysts call for a $20 billion price tag, while others lowball the amount at $7 billion.

  • The Governator’s green agenda will inevitably gain from the offshore debacle. In fact senators from California, Oregon, and Washington are already calling for a total ban on new offshore drilling projects along the Pacific coast. But did you honestly think they wouldn’t take advantage of the public anti-offshore sentiment to pass their agenda?

  • Meanwhile, the onshore oil plays that we can actually remain bullish on are few and far between. Had it not been for the Bakken’s success, I daresay the public would truly realize where we stand in regards to peak oil.

Enjoy your weekend,

keith kohl 

Keith Kohl

Editor, Energy and Capital

P.S. Just in case your work week was more chaotic than usual, take a moment and catch up on this week’s most-read stories from Energy and Capital and our sister publications, Wealth Daily and Green Chip Stocks:

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JP Morgan’s Alleged Manipulation of the Silver Market: A Modern Day Metals Conspiracy Theory
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Are You Buying the Wrong Gold?: Greece’s Gift
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The Iraqi Oil Bull Market: 2 Ways to Play This Surge
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