AMERICAN FABRICATED STEEL

When I was young, you had to buy American on government contracts.  This was eventually done away with because you could save money by opening up contracts.  And "American" companies circumvented the rules by moving to more favorable tax locations, usually with just mock offices.  So there was a lot of lobbying pressure to do away with the rule.

On the Keystone XL and Dakota Access pipelines, however, you are talking about private companies doing the building and not financed by the American government.  So President Donald (The Bully) Trump's edict that they must use American fabricated steel seems to me to only have jaw boning effect.*

What if the Canadian government says that the companies must use Canadian fabricated steel?  Trump has already OKed the building of the pipelines,  Will he rescind the edict?  And what if the companies use 51% American fabricated steel and the rest Canadian steel?

Notice above I use the word "fabricated" because the ore might come from any iron ore producing country and not necessarily mined in the U.S.  But we always seem to focus on the last step.  "American made cars" use parts that come from all over the world but the fabrication is done here.  Human beings are strange people.  Even the steel may come from elsewhere in a bulk form and the fabrication is done here.  That makes it U.S. steel.

What if the steel is fabricated somewhere else by an American based company?  Does that qualify as American made?  I think probably so.  Thin of oil.  Exxon-Mobile produces oil all over the world, is that American produced oil because Exxon is registered in the U.S.?

Does the following answer any of the questions?

In a meeting with small business leaders, Trump clarified that he not only wants pipeline companies to purchase pipes fabricated in the United States, but also expects the pipe suppliers to use raw U.S. steel. 
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Trump also revealed how he would pressure pipeline companies to comply: by potentially refusing to exercise eminent domain, the government's ability to appropriate private land.
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"First of all, this is private investment, so there's no legal authority for the government to require a private company to use domestic materials," he [Dan Ikenson, director of the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies.] said on Thursday, prior to Trump's comments at the retreat.

"Is it good policy to have the president dictate where U.S. companies buy their inputs? No. I think that's terrible. I think that's dictatorial. I think it's very bad precedence."**

President Trump needs some counseling.  It turns out that half the pipe needed for the Keystone XL Pipeline is already made and the Dakota Access Pipeline is nearly completed and may enter usage as soon as April.***  Is Donald (The Bully) Trump going to demand that the pipe already manufactured be scraped. Is he going to demand that the pipe be rip up that is buried?

* http://www.cnbc.com/2017/01/26/trumps-plan-to-force-pipeline-makers-to-use-us-steel-is-dictatorial-and-a-bad-idea.html
** http://www.cnbc.com/2017/01/26/trumps-plan-to-force-pipeline-makers-to-use-us-steel-is-dictatorial-and-a-bad-idea.html
*** http://www.cnbc.com/2017/02/23/trump-keystone-dakota-access-pipeline-makers-must-buy-us-steel.html

OIL FOR ASIA?

As we Americans won't permit the Keystone XL pipeline to be built in the U.S., the oil sands oil probably will go to Canada's West Coast for shipments elsewhere, including Asia.

KINDER MORGAN OIL-PIPELINE EXPANSION GETS CANADA BACKING

Kinder Morgan Inc.’s proposed expansion of a crude oil pipeline connecting Alberta’s oil sands to the Canadian Pacific coast cleared a key hurdle after a government advisory panel recommended it, Chester Dawson reports. But the support for the Trans Mountain pipeline is subject to 157 conditions.

The proposed 5.4 billion Canadian dollar ($4.1 billion) project involves nearly tripling the capacity of an existing pipeline. The  energy industry has lobbied hard for the expansion and has argued it is necessary to allow more of Alberta's oil sands oil to reach  global markets.

“The board found the benefits of the project would outweigh the residual burdens” on the environment and nearby communities, said Robert Steedman, chief environmental officer for the National Energy Board.

Still, shareholders concerned about the environment are increasingly challenging major oil companies, the Economist reports.

http://www.wsj.com/articles/kinder-morgan-pipeline-expansion-project-gets-backing-in-canada-1463693878

U.S. NOW EXPORTING OIL NEAR RECORD LEVELS

In July, the U.S. exported 441,000 bbl of oil a day.*  The forecast is for the U.S. to export a million barrels a day, exceeding our 1957 export peak!  Also a forecast is that we will be at record oil exports by the end of the year.

If we are exporting oil, apparently we are now independent of importing significant amounts of oil so we then can get out of the Middle East - Right?  We don't need the Keystone XL Pipeline.  We don't need to explore ANWAR for oil in Alaska.  We don't need to import any oil from Canada.  Heck, most of our exports are TO Canada (93%).*  If we are more than selfsufficent in oil so that we can export it, we can stop the expansion of fracking and polluting our land.

If we are not self sufficient in oil, then we should not be exporting it. I'm finding this to be very depressing.

* http://www.bloomberg.com/news/2014-09-30/rising-u-s-crude-exports-move-closer-to-1957-record.html?wpisrc=nl-wonkbk&wpmm=1

I'M SITTING OUT THIS ONE

I've decided I'll sit out the ISIS (ISIL if you prefer) War.  I usually record news programs like Morning Joe so I fast forward through the ISIS parts.  I may miss something else, but so be it.  If the news program is not recorded, I toggle between Soundscapes and the news program to avoid the ISIS War.

I went along with al Qaeda being very bad.  After all they actually killed nearly 3,000 people in this country.  Maybe more if you count those who are delayed in dying from smoke inhalation.  I felt we had to do something and invading Afghanistan to get al Qaeda was fine (remember Afghanistan tribes provided the first "boots on the ground.").  Now we are told that ISIS is even worse.  And the other day I heard of yet another organization that is considered even worse than ISIS in that their aim is to destroy the U.S.(Khorasan).*  And there are also those who say that Hamas is just as bad as ISIS.**

Now during most of my life (and I'm 83) the standard was to say that a group or individual was"worse than the Nazi's."  It is interesting that this analogy is no longer used.  After all, the Nazi's were defeated almost 70 yrs ago.  We've had two or three generations grow up since then.  I guess there is a feeling that ISIS is worse than the Russians.  Remember when it was Assad that had to go?  For the minute we'll ignore him, but I'm sure we'll get back to him some year.

To begin with, we won't put "boots on the ground" though special forces or the CIA don't count.  President Obama wants other Arabs or Muslims to do this.  I have to wonder why they haven't already done this?  They don't seem to worry about ISIS being a threat to them.  We always seem to align ourselves with a group of people that don't want to fight for their land.  Remember Vietnam and the Iraqi military divisions that collapsed when they were first threatened and armed ISIS by abandoning all their equipment?  How many years did we train Iraqi troops - 8 yrs at least, I think.  Who trained the North Koreans (well maybe the Soviets), North Vietnamese, Taliban and ISIS forces?   They seem to be self trained and better than all our training of their opponents    Hey the Americans will do it for us, calm down!

I don't remember the Korean War very well (though I was of age to be called up with the draft), but before we entered the Korean War, it seemed like the North had almost pushed the Southern forces into the sea.**  It used to be that the first thing we would do was send in 5,000 Marines and then regretfully build up from there.  It is interesting, however, that since we were kicked out of Vietnam, they want to be our trading partners, and we have no residual forces there.  Can you imagine that?  And Indonesia is still a non-Communist country.  Remember the Domino Theory where if South Vietnam would fall to the communist North, then the other SE Asian countries would fall, including Indonesia.

Of course the big focus on the Middle East concerns oil.  I had supported oil exploration of ANWR on the north slopes of Alaska and fracking, and the Keystone XL Pipeline to make us independent of  Middle East oil  and allow us to withdraw from there, but it hasn't worked.  Importing some oil from Canada, Mexico, and Valenzuela would be OK.

I yearn for the good old days of Carter and Reagan and Clinton when all we had to worry about were Embassy kidnappings, war with the island nation of Grenada, and fly by shooting of Iraqi radar posts.****  I'm going to sit out this latest war.

* http://www.businessinsider.com/what-is-the-khorasan-group-airstrikes-isis-islamic-state-2014-9
**  http://mondoweiss.net/2014/09/israeli-government-propaganda
***  http://www.history.com/topics/korean-war
**** http://stopcontinentaldrift.blogspot.com/2014/09/good-old-days.html

WHAT INDUSTRIES GET HOTTER?

Back when the calendar turned 1990, there was a rash of activity on what will the new millennium bring. I felt I couldn't even project the 1990s much less the next century; however, I was invited to participate in one on geology.

I thought back to 1890. Suppose I lived then, what would I have guessed? After all X-rays and the atomic nucleus were yet to be discovered. Radioactivity had only been discovered 5 yrs before. What I decided was that I should think of problems I would like to see solved and chances are in the next 110 years, something will turn up to solve them. For example, what the age of the Earth is was still a hot topic in 1890. Radioactivity solved this question, albeit well into the 20th century,  and it is a problem no more. Well here goes with three suggestions of hot industries for the future:

Railway Tank Cars. It looks like the Keystone XL pipeline will not be built although it is the cleanest and least expensive way to bring oil down from Canada and South Dakota. Through twisted logic environmentalists oppose the pipeline and lobbying by Saudi Arabia (our 2nd largest importer after Canada) seem to have killed it. So it will apparently have to be brought down by railway. What is the railroad most likely to benefit from this - BNSF. Unfortunately this company is wholly owned by Berkshire Hathaway.

So what about railway tank cars. The order backlog is immense. Various producing and refining companies are buying their own tank cars. A favorite of mine is Valero Energy (VLO) though we currently do not own any stock in it.  It is also one of the only refiners to be able to handle sour oil. They have ordered 2,000 tankers as has Phillips 66. Greenbrier Companies (GBX) has orders for 1,250 tankers. They also have orders for over a billion dollars of railway cars (tankers plus others). They are a small cap company selling near their 52-week high of $25.33 but earlier this year, you could have bought the stock for $17/sh. They are currently experiencing a loss of earnings. They pay no dividend so by my own rule at age 82, I cannot buy them.

Well, Googling the topic turned up five companies (http://wire.kapitall.com/investment-idea/tank-car-manufactur...) Of course do your own due dillegence before investing in any of these.

Next up is Robotics. Yes, robotics are making the news, and you can find all sorts of places to buy materials to make your own robots. But, ladies and gentlemen, the robot revolution is only starting. You ain't seen nothing yet. So lets look at 10 companies (http://www.fastcompany.com/most-innovative-companies/2013/in...). And if you Google this, you will come up with -- Google and their automated car which is not even in production yet. I believe this field will become so big that it can even move a stock like Google (again no dividends). And don't forget robotic surgery and military uses that have already begun but I expect to grow substantially.  As before, do your own due diligence.

And I wouldn't discount Solyndra. What, you say? Solyndra went bankrupt year's ago and was a big waste of government investment. Maybe so, but they are still in business as 360 Degree Solar Holdings (SOLY:US). The advantage of this technique is that it doesn't use solar glass. They were put out of business by China slashing the price of solar glass that served one nice purpose. Photovolaics are dropping in price and my guess is that electricity production by this means is only in its infancy. Even if you don't like Solyndra, here are companies involved (mostly foreign): http://www.bloomberg.com/news/2012-10-22/solyndra-wins-court-approval-of-bankruptcy-exit-plan.html Here are three suggestions of solar energy companies: http://www.bloomberg.com/news/2013-08-20/trina-joins-sunpower-and-jinko-in-solar-turnararound.html (Note: Solyndra is # 13 among thin film producers.) I expect that some year, solar panel will be the common form of roofing.  Before investing in any of these companies, do your own diligence, of course.

Well, I'm exhausted, kiddies, and I can't get involved in any of these at age 82, but maybe some of you whippersnappers can take a chance, so enjoy!

MORE ON OIL

The price of oil has recovered since 2010 to above $90/bbl in current dollars.The figure above is from:

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2011/09/06/things-tha t-make-you-go-hmmm.aspx

Global oil production (scroll down to the figure below) was falling to some extent because OPEC had not yet picked up the drop in production from Libya.

For oil production by country, see: https://en.wikipedia.org/wiki/List_of_countries_by_oil_production.  Note that U.S. states are inserted at the appropriate production level.  Texas, for example would be equivalent to number 15 in production of countries.  The U.S. itself is number three.

Because of additional production from frack oil, imports of oil by the U.S. have fallen to the lowest level since 1997 at 8.5 million barrels/day. Also because of frack oil, imports of light sweet crude oil are falling markedly.  The two foreign countries most involved are Nigeria (imports fallen about in half) and Angola imports have fallen to 39% of the 2008 value.  Imports of heavy oil from Saudi Arabia, however, have actually risen and was 1.4 million barrels a day, the highest level since 2008.  Iraqi imports rose 3% and Venezuelan imports were up 4% from 2011 values.  The Keystone XL pipeline would transmit mainly heavy oil and would reduce our dependence on Saudi oil and Middle Eastern oil in general. (http://www.fool.com/investing/general/2013/05/04/us-oil-imports-are-falling-but-reliance-on-these-c.aspx).

KEYSTONE XL PIPELINE

You might be interested in what Fareed Zakaria has to say about the Keystone XL Pipeline: http://swampland.time.com/2013/03/07/build-that-pipeline/

He is getting a lot of flack on it.  Here is just one: http://oilprice.com/Energy/Energy-General/Fareed-Zakarias-Unconvincing-Arguments-to-Build-the-Keystone-XL-Pipeline.html  I don't find the objections to the pipeline to be very convincing.  Following are some excerpts from the Zakaria piece.

The U.S. Department of State released an extremely thorough report that tries to answer this question [What if the pipeline isn't built?]. It concludes, basically, that the oil derived from Canadian tar sands will be developed at about the same pace whether or not there is a pipeline to the U.S. In other words, stopping Keystone might make us feel good, but it wouldn’t really do anything about climate change.

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Rail traffic in this corridor [Keystone XL pipeline route] is already exploding: the number of carloads of crude oil doubled from 2010 to 2011, then tripled from 2011 to 2012. And remember, moving oil by train produces much higher emissions of CO[subscript 2] (from diesel locomotives) than flowing it through a pipeline.

I can attest that Canadian businesspeople and officials are planning seriously for Asian markets–especially since they have come to regard U.S. energy policy as politicized, hostile and mercurial. Whoever uses the oil, the CO[subscript 2] will be released into the atmosphere just the same.

I believe the pipeline would also carry fracking oil from North Dakota and Montana.  Though I am all for increasing the gas mileage of automobiles or even using substitutes like natural gas and I am for public transportation, I want to see us get out of our need for Middle East (and Venezuelan) oil.  It would lower the need for our getting into wars there.  It is true that we didn't go into Afghanistan for oil, but it is the exception.

TOWARD U.S. ENERGY INDEPENDENCE?

A big part of the game of politics is for the opposing political party to blame the president for anything that goes wrong while refusing him credit for anything that goes right. Not surprisingly with the gasoline prices going up, we see President Obama blamed for these rising prices though he can do little about them (Short of reimbursing consumers something per gallon of gas to effectively lower prices consumers pay, something that I doubt the opposing party would agree to as it would run up the Federal deficit. There are countries that do this however.). Democrats did the same thing to President Bush in 2008 so it is just bi-party fun. If you were to read one article on the oil story, the article by Clifford Krauss and Eric Lupton in the March 23rd issue of the NY Times is the one you should read (http://www.cnbc.com/id/46831786). As they point out, the facts are that oil production in the U.S. is up from 4.95 million barrels/day in 2008 to 5.7 million barrels/day.

And as Krauss and Lupton (2012) point out, this increase is largely due to an environmentally controversial law and tax breaks passed by the Bush Administration plus the high price of oil today. At the same time, imports of oil have fallen from 60% in 2005 to 45% today (Krauss and Lupton). As good as this may be, any knowledgeable person will tell you the gasoline prices have nothing to do with U.S. oil production. But this progress in lowering imports of oil has come with damaging local environmental consequences. Thus it is a tradeoff.

Furthermore, the Republican Party loves to tell the price of gasoline at the time that President Obama took office, but they carefully don't mention that nearly four months before the president was elected and six months before he took office, oil was at an all-time high , a record that stands through this date of blog publication. Subsequently the Great Recession caused the price of gasoline to plunge. The price of West Texas Intermediate (WTI) oil hit its all-time high in July of 2008 at $145.29/bbl [or in inflation corrected terms $151/bbl (Krauss and Lupton)] and the price of gasoline also hit its all-time high in that time period [$4.11/gal or $4.30/gal in inflation corrected terms (Kraus and Lupton)], records that still stand as of this date (See chart below from http://gasbuddy.com/gb_retail_price_chart.aspx).

Incidentally, although the standard quote for oil in the U.S. is WTI, the price of oil produced in various places in the U.S. vary markedly from around $80/bbl for North Dakota sour crude (http://crudeoilpostings.semgroupcorp.com/) to around $130/bbl for Louisiana light sweet crude (http://www.bloomberg.com/quote/USCRLLSS:IND).

Regarding the XL Pipeline:

Contrary to the way the topic is put by politicians, the XL Pipeline in the U.S. is very complicated and the best I can do is recommend you read the Wikipedia article: http://en.wikipedia.org/wiki/Keystone_Pipeline. And the lawsuits against the pipeline are not just from environmentalists but from refiners as well. I personally don't know how President Obama could approve the whole package until he is presented with either a final route for the pipeline or several recommended routes from which he could pick one. The part President Obama seems ready to endorse is the route from Cushing, OK, south and any route chosen from north of there is going to end up in Cushing anyway. So connecting will need be no problem. As far as the rest of it is concerned, I'm sure the XL Keystone pipeline will be built, one route or another. At any rate, it certainly has nothing to do with the price of oil now. The owners of the pipeline say they will sell to both Asia and the U.S. What does that mean? They will sell to the highest bidder? Getting congress involved in technological and scientific projects is scary.