Obama's Next Four Years

Politics and Energy intersect.  The Election sets up a very serious crash at this intersection.  Over the next four years, federal agencies like the EPA, Department of Energy etc. will help implement Mr. Obama’s agenda.  The war on coal will continue in earnest, oil and gas drilling on Federal Lands will be limited by OCS leasing and serious regulations will be promulgated on fracking.  Continued trillion plus deficits coupled with Progressive ideology will, at some point yield higher taxes.   Look for a push for fee on carbon and/or a VAT.  Don’t look for real spending cuts.  In fact look to the agencies for more “bailouts” (one of the more significant may be mortgage principal write-offs for homeowners costing the taxpayer $100 billion plus).  Here are my detailed predictions for the next four years.

 

·         Politicians of all stripes will strap on their best can kicking shoes.  The “Fiscal Cliff” will be avoided (probably at the last minute) with an agreement to extend tax cuts (except perhaps for high earners), stop sequestration, however the payroll tax holiday will be allowed to expire.  The agreement will be to establish some sort of working group to address the deficit problems.  As usual this group will fail to come to agreement

·         No serious budget will be put forth by the President and no budget will come out of the Senate.  The House will again pass a budget and it will be ignored by Mr. Reid.  The Country will be run by a series of CRs and the debt ceilings will be raised.  Yes, there will be all sorts of bluster from the Conservatives regarding CRs and debt ceilings but in the end Conservatives will reluctantly agree.  The alternative of “shutting down the Government” would be political suicide. By the end of his second term, Mr. Obama will have driven the debt to $20 Trillion or more

·         When there is another financial crisis, Progressives will push for a “temporary” VAT to address the deficit.  The VAT will become permanent and increase over time.  VAT in Europe averages about 15-20%.  I truly believe this is Mr. Obama’s end game.

·         Congress should just recess for until the mid-term elections except for the votes on CRs and debt ceiling

·         Obamacare will be implemented with disastrous results.  I believe its cost will be at least $300 billion per year when fully implemented.   Lip service will be given to cost containment but nothing of note will be addressed

·         Federal Agencies will drive Mr. Obamas agenda

o   The first casualty will be Chris DeMarco.  .  As head of the Federal Housing Finance Authority (FHFA) it is his job to protect the taxpayer’s stake in Fannie and Freddie.  He has waged the good fight of opposing political pressure to reduce principal balances on Fannie and Freddie mortgages.   Free from the constraint of having to run again, Obama will likely fire DeMarco and replace him with a recess appointment of a political tool by the end of the year.  Folks, watch your wallets.  Estimates for the principal reduction plan begin at $100 Billion (taxpayer dollars of course).

o   The war on Coal will continue in earnest

§  MACT rules will be implemented

§  Rules for new coal fired plants will be implemented

§  More regulations will be promulgated regarding strip mining.  It will be nearly impossible to permit new mines

§  Coal’s as a share of electrical generation has already dropped from about 50% to about 35%.  Look for further decline.  This is too bad because coal is one of the most economic alternatives to produce electricity.  Look for an increase in electrical rates because of phasing out coal and replacing it with high cost green energy (at 2 to 3 times the cost of traditional energy – for more on this read a bit about Renewable Portfolio Standards)

o   Don’t expect any new frontier areas on Federal lands to be opened up for drilling.  It simply will not even be considered and Production of oil and gas on Federal land will continue to decline (It declined 11% in 2011 alone)

o   Expect new strict regulations on “Fracking”.  This will reduce potential production on private and state lands

o   EPA will impose a “fee” on carbon emissions from stationary sources like refineries, power plants and large industrial facilities.  I know this might be a longshot but since Cap and Trade is dead legislatively, EPA is the only option left.  The fee will be sold as a means to curb global warming and it is in essence a tax so it will generate revenue (potentially 100s of billions of dollars) for the government at the expense of the consumer.  It will also encourage more outsourcing

o   I cannot predict a decision on the Keystone XL pipeline.  The pipeline, in my opinion would create jobs both directly and indirectly (some claim over 100,000) but would also stimulate the refining industry on the Gulf Coast to expand its capacity creating even more jobs.  The pipeline would ensure that most of the tar sands crude produced in northeastern Alberta, Canada finds its way to the Gulf Coast.  In the future the pipeline capacity may be further expanded to transport oil from the Bakken field to the Gulf Coast as well.  As you know, there are two Democrat constituencies on opposite sides of the argument.  The environmentalists want the pipeline stopped because they are opposed to what they call “dirty oil” generated from the tar sands.  In my opinion this is misguided.  The economic incentives for Canada are too great to shut in the tar sands.  They will simply move the oil to their West Coast ports for shipment (much will likely go to China).  The unions want the project approved so that high paying union jobs will be created.  If I had to guess, the pipeline will be stopped by Mr. Obama.  I don’t think he cares about these potential American jobs.  I think he is more concerned with Green Energy projects

·         More money will be wasted on Green Technologies such as solar and wind.  The President’s record has been dismal and a huge waste of taxpayer dollars.  According to an article published by Fox on October 20, 2012, a complete list of faltering or bankrupt green-energy companies include the following (note that company names followed by an asterisk have already failed).

Evergreen Solar ($25 million)*
SpectraWatt ($500,000)*
Solyndra ($535 million)*
Beacon Power ($43 million)*
Nevada Geothermal ($98.5 million)
SunPower ($1.2 billion)
First Solar ($1.46 billion)
Babcock and Brown ($178 million)
EnerDel’s subsidiary Ener1 ($118.5 million)*
Amonix ($5.9 million)
Fisker Automotive ($529 million)
Abound Solar ($400 million)*
A123 Systems ($279 million)*
Willard and Kelsey Solar Group ($700,981)*
Johnson Controls ($299 million)
Schneider Electric ($86 million)
Brightsource ($1.6 billion)
ECOtality ($126.2 million)
Raser Technologies ($33 million)*
Energy Conversion Devices ($13.3 million)*
Mountain Plaza, Inc. ($2 million)*
Olsen’s Crop Service and Olsen’s Mills Acquisition Company ($10 million)*
Range Fuels ($80 million)*
Thompson River Power ($6.5 million)*
Stirling Energy Systems ($7 million)*
Azure Dynamics ($5.4 million)*
GreenVolts ($500,000)
Vestas ($50 million)
LG Chem’s subsidiary Compact Power ($151 million)
Nordic Windpower ($16 million)*
Navistar ($39 million)
Satcon ($3 million)*
Konarka Technologies Inc. ($20 million)*
Mascoma Corp. ($100 million)

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