The people have spoken.

Now, President-elect Obama will tackle one of the most unenviable jobs in history. Saddled with two ongoing wars, a record budget deficit, an economy in a worsening recession, and Peak Oil on the immediate horizon, he’s got one hell of a mess to clean up.

As my regular readers know, I believe energy is going to trump all other issues, and a number of energy companies (and their investors) will capitalize in a major way. (More on that below.) And so, I’ve watched this presidential campaign alert to any comments about energy policy. At first they were few and far between, but once oil prices blasted into record territory this summer, the candidates’ positions on energy started to clarify.

In time, I came to support Obama’s platform over McCain’s (although the latter was clearly more knowledgeable about the geopolitics of oil) largely because he seemed to understand the reality of peak oil. “Without a doubt, this addiction is one of the most dangerous and urgent threats this nation has ever faced,” Obama said. “We know that we can’t sustain a future powered by a fuel that’s rapidly disappearing, not when we purchase $700 million worth of oil every single day from some of the world’s most unstable and hostile nations, Middle Eastern regimes that [will] control nearly all of the world’s oil by 2030…We know that we can’t sustain this kind of future.”

How refreshing to hear a high-profile politician tell the truth about our oil situation! He even quoted T. Boone Pickens, saying: “This is one oil emergency we can’t drill our way out of.”

Now that Obama has the nod, let’s see what his energy platform has in store for us.

Provide Short-term Relief to American Families

This plank seems blatantly intended to win a few votes.

The first proposal would dispense $500 (individual) or $1000 (family) “emergency energy rebates” to offset rising costs, funded by windfall profits taxes on oil companies. I can’t support this idea, as much as I’m sure we’d all like the help. I have always been opposed to levying windfall profits taxes on energy companies, because it stifles their initiative, and to me it’s fundamentally anti-capitalist. It’s also, at best, a four-month respite. By the plan’s own text, it would only “offset entire increase in winter heating bills for a typical family in a cold-weather state” or “offset the entire increase in gas prices for a working family over the next four months.”

The plan would also “crack down on excessive energy speculation,” citing “loopholes” which “contributed to the skyrocketing price of oil on world markets.” I wasn’t able to find out any more details on this. If it’s about raising margin requirements for oil speculators, or otherwise aimed at taking some out of the excess out of the system, it could be a good move. It has been reported that “paper barrels” traded have been as much as 22 times the number of physical barrels traded, so I think that could be curbed without harming the markets. However, there are a lot of ways such a crackdown could be done badly, too. It’s hard to know without seeing the details. This area deserves our continued vigilance.

The third element of this plank would trade some light sweet crude from the SPR today for an equivalent amount of “heavier crude more suited to our long-term needs” later. This too is a mixed proposition. First, I can’t imagine how anyone could argue that heavier crudes are somehow “more suited to our long-term needs.” Heavier crudes are, and always will be, less desirable. Period. Second, I can’t get behind the idea of take now, pay later. I think the prime objective is to keep the SPR as full as possible. That said, if price relief is really the objective, it might help, a little.

Moving on…

Eliminate Our Current Imports from the Middle East and Venezuela within 10 Years

That’s a laudable goal, but what does it mean? According to the EIA, in August of this year we imported 2.4 million barrels per day (mbpd) from the Persian Gulf, and 1.3 mbpd from Venezuela, for a total of 3.7 mbpd, or 28% of our 13 mbpd of “total crude oil and products” imports for the month. So that’s the target: 3.7 mbpd, or 1,392 million barrels (1.4 billion barrels) per year.

First, the plan would increase fuel economy standards by 4% each year. That makes good sense to me, considering that we’re starting from an average fuel economy of a pathetic 25 mpg today, and we need to get closer to 100 mpg asap.

Second, it would put 1 million plug-in hybrid electric vehicles (PHEVs) on the road by 2015. Based on what I heard I at the PHEV conference back in July, the standard replacement rate in this country is 15 million vehicles per year, so that hardly seems ambitious. As part of the PHEV push, battery technology would receive a big boost in R&D spending. Consumers would receive a $7000 tax credit to buy these new high-efficiency vehicles, and American auto manufacturers would receive $4 billion in loans and tax credits to retool their factories. On this count, I say full speed ahead.

The Obama energy plan also includes a major push for “next-generation” and “sustainably-produced” biofuels. Undoubtedly “next-generation” refers to cellulosic ethanol, as distinguished from the corn ethanol boondoggle, and “sustainably-produced” means cellulosic ethanol and various other forms of biofuels, especially biodiesel. Now, my long-time readers know that I have been extremely skeptical of claims about the sustainability and net energy of biofuels in general, and indeed I wonder if any of them make any sense at all at the scale we’re talking about. (They do, I think, make sense for small independent farmers who want to grow the fuels they need for their own tractors, as Rudolf Diesel originally intended.) I suspect that most of the Obama biofuels plan either delivers too little net energy, or isn’t actually sustainable after you run it for a few years, but it sounds good and it does in fact relieve some of the burden of imported fuel…for better for worse.

In order to have a way to use all that ethanol, the plan would also mandate that all new vehicles have flex-fuel capability. I doubt that will help much—most E85 vehicles on the road today haven’t seen a drop of actual E85 in their entire lives—but it doesn’t cost any more, so I guess it doesn’t hurt.

The “Use it or Lose It” call on energy companies to use their existing oil and gas leases before asking for permission to drill in the outer continental shelf (OCS) and on other federal lands is, I think, silly. If the existing leases were thought to have a worthwhile amount of oil and gas in them, we would have been drilling them already.

Somehow, though, if we are to eliminate a big chunk of our imported oil, we’ll have to produce more domestically. That’s where the new domestic unconventional oil and natural gas plays come in. Since 2006, we have identified dozens of these ventures and bagged some excellent profits on them for subscribers to our Pure Energy Trader service, but with the Obama administration planning to take aim at foreign oil imports, the country will now be desperately depending on these producers.

The Obama plan also recognizes that a limited amount of new offshore drilling may be politically expedient, and in order not to make the perfect the enemy of the good, he’d back it in exchange for Republican support for his energy agenda. I think that makes sense. At least he understands that no matter how many more wells we drill in the OCS and ANWR and the rest of America, it won’t make a difference in the basic outlook for oil, and the ultimate effect will be negligible.

That’s the kind of basic awareness about peak oil that absolutely must inform our energy policy. Domestic production supplies only about 5 mbpd of our 21 mbpd habit, it has been in terminal decline for decades, and nothing is ever going to reverse that trend.

Returning to the goal of eliminating or substituting something else for 28% of our current oil imports within four years, it’s hard to say on the basis of this limited information whether or not it can be done. My guess is that it can be, but it’s going to take a very concerted effort from the White House all the way down to each of us to make it happen.

In any case, I think it’s a laudable goal and we should try to meet it. It will also present numerous investment opportunities around PHEVs, like the ones my colleague Jeff Siegel over at Green Chip Stocks has been watching.

Create Millions of New Green Jobs

Generally, there are some good ideas in the “green jobs” plank of the platform.

First, a goal of generating 10% of our national electricity supply from renewables by 2012, and 25% by 2025, would put America’s goals in line with Europe’s. It would give crucially needed guidance to the renewables market to sustain the necessary capital commitment for its continued growth. Incentives for solar, wind, geothermal, and efficiency technologies on every level, designed to leverage private capital, could fulfill those goals.

Simply put: Obama’s win is the best thing that could possibly have happened to the renewable energy sector. Leveraged federal funding for solar, wind, and geothermal technology will drive the private sector forward to make all of those technologies more efficient, more robust, and more effective. With that kind of support, we could finally crack the storage problem for intermittent renewable energies, which would unleash a massive tide of new renewable energy projects.

As renewable energy is the obvious wave of the future, there are some excellent prospects for investing in solar and wind in the Pure Energy Trader as well.

One of the best parts of the plan includes specific goals targeted at energy efficiency. Efficiency is clearly the low-hanging fruit, and dollars spent on it pay off many times more than supply-side approaches. Obama’s plan would:

• Reduce electricity demand 15% from projected levels by 2020 (although I wasn’t able to find any details as to whether or not that projection includes the added load from millions of PHEVs)
• Weatherize one million low-income homes each year for the next decade
• Make new buildings 50% more efficient over the next four years

Obama also hinted in a stump speech in Michigan that he’s looking to follow the example of the Golden State:

The state of California has implemented such a successful efficiency strategy that while electricity consumption grew 60% in this country over the last three decades, it didn’t grow at all in California. […] There is no reason why America can’t do the same thing. We’ll set a goal of making our new buildings 50% more efficient over the next four years. We’ll follow the lead of California, and change the way utilities make money, so their profits aren’t tied to how much energy we use, but how much energy we save.

These are all fine ideas and probably would save the claimed $130 billion in energy bills, and then some. I support any gains in efficiency.

There are also a few ideas about which I am skeptical. First is a commitment to help build five first-generation commercial scale coal-fired power plants using carbon capture and sequestration (CCS) technology. Much has been made of CCS, and it could in fact deliver more power with less carbon, but the costs have been hard to quantify (they’re possibly quite large, consuming one-quarter or more of the energy input) and the capital commitments have been hard to secure in an uncertain regulatory environment. So it’s the really perfect opportunity for a federal boost to help get an industry on its feet and realize an excellent return on the investment. On the other hand, scaling CCS commercially hasn’t been proven, and could turn into another government money boondoggle—it’s hard to say until we do it.

But if this so-called clean coal technology really delivers, then it will be a wise investment indeed, for the US still has (relatively) abundant supplies of coal, and could benefit from a greenhouse-gas controlled way of exploiting it.

Another set of new jobs (although I don’t know if they should be called “green”) would be provided by building the Alaska Natural Gas Pipeline. No complaints here; with North American gas in decline since 2002 and limited hopes for LNG from abroad, we’re going to need all the gas we can get soon enough.

A whole host of grid technology investments round out the package. Federal money is crucially needed to beef up and stabilize the national grid, and get it ready to receive and distribute a big new influx of renewably generated electricity. The Obama plan includes smart grid and demand management technologies, smart metering, distributed storage, power flow control, and advanced grid communications, all of which will clear the path for an explosion of renewable energy in the coming decades. Again, Green Chip Stocks has a handful of smart ways to play the smarter and beefier grid.

Reduce our Greenhouse Gas Emissions 80 Percent by 2050

A final plank in the energy platform is an economy-wide cap-and-trade program to reduce greenhouse gas emissions to 80 percent below 1990 levels by 2050.

While I support reducing greenhouse gas emissions, the details of such programs can get messy. I prefer a carbon tax approach, because it’s less vulnerable to manipulation and speculation. Either way though, carbon will come with a price attached, and some of the proceeds will be invested in a cleaner energy future. That’s all good.

One factor never mentioned in Obama’s plan, but which I think is implicitly there, is depletion. With global peak oil likely to happen within the next two years, and global peak natural gas, coal, and nuclear power likely by 2025, it’s very possible that we could meet that 2050 goal the hard way: by having nothing left to burn.

A Taste of Realism

Overall, I have to say that Obama’s plan, although it has its flaws, is generally sensible and pointed in the right direction, unlike his opponent’s.

Obama also has shown that he truly understands the challenge he has fought for the right to tackle. From the Michigan speech:

But the truth is none of these steps will come close to seriously reducing our energy dependence in the long term…We have to make a serious, nationwide commitment to developing new sources of energy, and we have to do it right away. Right now. We cannot wait….

Breaking our oil addiction is one of the greatest challenges our generation will ever face. It is going to take nothing less than the complete transformation of our economy. The transformation is going to be costly, and given the fiscal disaster we’ll inherit from the last administration, it will likely require us to defer some other priorities. It’s also a transformation that will require more than just a few government programs. Energy independence will require an all hands on deck effort from America. Efforts from scientists and entrepreneurs, from businesses, and from every American citizen. Factories will have to retool and redesign. Businesses will need to find ways to emit less carbon dioxide. All of us will need to buy more fuel-efficient cars….

All of us will need to find new ways to improve efficiency and save energy in our own homes and businesses. And none of this is going to be easy. It’s not going to happen overnight. If anyone tries to tell you otherwise, they are either fooling themselves, or they’re trying to fool you.

But I know we can do this. We can do this because we’re Americans. We always do the improbable. We always beat great odds. We always rally together, whatever challenge stands in our way. That’s what we’ve always done, and that’s what we must do now. For the sake of our economy, our security, and the future of our planet, we must end the age of oil in our time.

Amen to that!

For the first time in many, many years, I am hopeful. Our new President not only “gets” peak oil, and sees our challenges clearly, he also seems to be clear-headed about the path forward. I think he’s got the right stuff to lead our nation through what may prove to be a brutal four years, and I am once again incredibly proud to be an American.

Until next time,

Chris