The Worst Moment of the Presidential Debate — and Your Chance to Profit From It

Thursday’s debate between President Trump and Vice President Biden covered many issues: COVID, immigration, race relations and even that so-called “Laptop from Hell.”

But the two men’s thoughts on one topic in particular made me cringe.

Yes, both candidates!

I’ve spent decades following the energy industry.

So I was incredulous when Trump boasted about America’s “energy independence.”

I was even more flummoxed when Biden talked about “transitioning from fossil fuels” to “renewable energy” with allegedly “net-zero emissions.”

Ugh…

It’s all fake.

Allow me to blow away some smoke — if I may still use that quaint, pollution-themed term — and clarify what these guys are really saying.

They’re pandering to people who don’t have much of a clue about energy. But as you’ll see, there are some investable ideas hiding behind their words.

Let’s dig in…

With all due respect to President Trump, the phrase “energy independence” is inaccurate.

It implies that the U.S. produces all of its own energy needs, one way or another. But that is far from the case.

Yes, the U.S. is self-sufficient in natural gas and coal… and I suppose hot air from politicians.

However, we still come up short in oil, electric power and even basic uranium on the nuclear side.

Let’s begin with oil…

According to the Department of Energy/Energy Information Agency (EIA), in 2019 the U.S. produced over 12 million barrels of oil per day.

And so far in 2020, average U.S. daily oil output is about 11 million barrels per day. This decline in output from last year is due to the ongoing economic contraction (i.e., lower fuel demand) caused by COVID and widespread state lockdowns. That, and many uneconomic oil wells being closed in.

At the same time, according to EIA data, over the past year the U.S. has imported about 8 million barrels of oil per day. The number goes up and down, depending on seasons, weather and such.

Per EIA data, Canada and Mexico account for a large fraction of U.S. daily oil imports. That’s fine, considering the amicable political relationship between the U.S., Canada and Mexico.

But quite a few imported barrels also come from Russia and Saudi Arabia, with other nations like Colombia sending tankers. The short takeaway on that is that there’s still political risk behind significant levels of U.S. oil imports.

It’s worth noting that the U.S. no longer imports oil from Venezuela, due to political differences. And you may be interested to know that most Russian and Saudi oil is “heavy” crude that U.S. refineries need to make up for lack of Venezuelan product.

In other words, Russian and Saudi oil is actually important to the refinery blend.

The point is… The U.S. is not “independent” of foreign oil, nor of foreign political and energy risk.

In fact, many U.S. refineries depend on imported oil, either as primary feedstock or to blend with U.S.- produced oil. This all gets into the chemistry of refining, but the key point is that the U.S. absolutely imports oil and relies on foreign product to keep the pipelines and gas tanks filled.

Frankly, there’s likely no way that the U.S. will ever supply all of the oil it uses every day. We’re better off just keeping up good trade relations with foreign sources. (Yes, even with Russia!)

Meanwhile, our domestic electricity situation is not quite as rosy as you may believe. And really, you may be surprised to learn that it’s an issue an all!

Unless you follow the markets, you may not realize how much electricity the U.S. imports.

In fact, you probably assume the U.S. has ample electric generating capacity, ready to go at the flick of a switch to meet demand.

But that’s not the case.

Consider New England. According to ISO New England — an organization focused on meeting power needs for the region — “On an annual basis, New England is generally a net importer of electricity via interconnections to neighboring power systems in New York, Quebec, and New Brunswick.”

In short, the New England grid requires significant electricity imports to maintain adequate “load,” meaning the basic level of power in the lines just to keep lights on, refrigerators running and industry working.

In recent years, the level for New England has been about 18% of total electric power usage in the region. (And note; this is before we see widespread adoption of electric powered vehicles.)

One major source of electricity to New England is Hydro Quebec in Canada, which has been “wheeling” power across the border since the 1980s.

There are similar stories about electric power imports from Canada across the U.S. Midwest, and even out West, with power wheeling down from British Columbia into, say, California with its recent brownouts and blackouts.

Again, the point is that large areas of the U.S. are not “energy independent” for electricity. We require sizeable imports from Canada to plug significant gaps in the supply-demand equations.

Canada is low-risk, to be sure. But it’s not “independence” for the U.S.

Things get much more dire when you look at U.S. electric power generation from the nuclear side of things.

According to EIA, about 19.7% of U.S electric power generation comes from nuclear plants. Obviously, this is an important source of power.

So how much uranium does the U.S. mine to support its nuke power plants?

You sitting down?

The amount of currently produced primary U.S. uranium output is… exactly zero!

Let that sink in. Zero.

Right now, the U.S. produces NO uranium from any mine in the land. None.

Of course, the U.S. has uranium in various geological settings. But due to long-term trade and regulatory policies — from mining to processing, trade to international finance — it’s not commercial to mine it.

Instead, we’re forced to import uranium from Canada, namely Saskatchewan, as well as from Australia and Namibia. But much U.S. uranium also comes from Russia and Kazakhstan.

There’s that political risk thing again. And it’s yet another result of the long-term deindustrialization, financialization and globalization of the country.

Point is, there’s no “energy independence” for nuclear power in the U.S., and there won’t be absent a generational effort to revive the nuclear industry, starting with mines and mills.

Of course, Trump’s “energy independence” claim can be chalked up to the kind of hyperbole he’s known for.

If he were a more nuanced politician, it would have been more accurate for him to say the U.S. enjoys “energy security.”

This means that the country has reliable trade and financial relationships which allow energy markets to function effectively, moving product from supply sources to demand centers.

Even if you know nothing about drilling wells, mining ore or generating electricity, energy security is what you want when you reach for the light switch or stop at the gas pump.

So I think we can give Trump some slack here.

Biden’s plans for renewable energy, however, were nothing short of wild-eyed wishful thinking and political pandering.

There are many angles to renewable energy, from solar power to windmills. Unquestionably, they can supplement fossil fuel needs.

But achieving “net-zero” emissions is a total pipe dream… and the idea of a “Green New Deal” is a perverse, expensive joke.

Consider solar power.

Sure, the sun shines bright on parts of America (except at night). But systems to capture that energy rely in large measure on foreign imports, from entire complexes of front-end equipment down to critical metals that the U.S. does not produce.

The world’s leading manufacturer of solar panels is China. China’s cumulative production of solar panels, and total installations, is more than double the rest of the world combined.

China is way ahead of everybody, and Chinese manufacturers control over 70% of the global market for solar panels.

Right away, the U.S. is about 20 years behind the curve in terms of having a manufacturing base for solar, along with supply chains for components. (Hold that thought on supply chains and components.)

China also builds immense numbers of windmill turbines, as do several European companies.

Of the top 10 global windmill producers, almost all are non-U.S. entities. The only large U.S. name on the windmill list is General Electric.

Again, the U.S. has missed the train on the manufacturing side of “renewable” wind energy, for reasons that go back several decades: globalization, financialization, deindustrialization, etc.

Simply the lack of manufacturing base in the U.S. is bad enough, from the standpoint of going all-in on “renewable” energy.

That is, if the U.S. is going to follow this trail, the country will be importing boatloads of end-use products, all at the mercy of overseas supply chains.

Now consider the guts of a solar panel or windmill…  They’re chock full of rare earth elements (REEs). Without the REEs, these things don’t work.

Yet the U.S. has no industrial chain that takes REEs from mine to end-use, either for solar panels of windmill magnet components.

Yes, there’s limited REE mining in California, at Mountain Pass. But presently, the ore goes on a cargo ship to China for processing. There’s no refining in the U.S.

For REE-bearing electronics and magnet components, the U.S. must buy materials or components and assemblies from foreign sources, mostly Chinese when you trace the material back to origin.

Which brings us back to the original point…

No, the U.S. is not “energy independent.”

The country imports quite a bit of oil. The U.S. imports even electricity, just to keep the lights on. And there’s zero uranium being mined.

On the “renewable” side, the U.S. is far behind (think in spans of decades) the rest of the world in terms of manufacturing solar panels and wind turbines, with a limited supply chain and virtually no REE refining capability for electronic components and magnet powders.

The problem has roots going back 30 years and more; certainly to failures from the year 2000 onwards, including under the Obama-Biden administration.

In other words, much of the discussion of U.S. energy is “fake” hope for where the country stands and where it’s going in the future.

Still, those hopes do point to some interesting investment opportunities.

Remember, Whiskey is not a portfolio newsletter. But I’ve been following many companies in the energy arena for many years.

When it comes to oil, there are hundreds of names out there. But consider just one large, well-known company, Exxon Mobil (XOM). Shares are trading at a 23-year low, while the dividend is north of 10%. It’s a rebound awaiting its moment.

As for uranium, one company holds currently shut-in assets in Texas and could get back into operation in short order if necessary. It’s Uranium Energy Corp. (UEC). It’s a speculation on a government decision to kick-start domestic uranium mining.

With REEs, I’ve previously mentioned Medallion Resources and Defense Metals. Both trade over the counter (OTC).

Medallion has an advanced-stage program to process mineral sands comprised of monazite, which is rich in rare earths. Miners have been extracting rare earths from monazite since the 1940s, so the technology is de-risked. The company is moving towards a deal to set up industrial-scale operations in North America.

Defense Metals, meanwhile, is an early-stage exploration play, holding claims on a well-endowed body of rare earth minerals in the middle of British Columbia. Drill results so far indicate large-scale, high grade mineralization to make up a significant ore body.

There are many other “energy” ideas out there, and I follow many of them.

For now, I just want to nail down the fallacies of arguments we saw in the presidential debate about American energy.

We’re not “energy independent,” per Trump. And there will be no “net-zero” future of so-called “renewables,” per Biden. Not without a lot of reinvestment in primary mining, basic industry, supply chain reconstruction and reindustrialization, which is contrary to the core globalist agenda that Biden-Harris truly stand for.

On energy alone the U.S. faces generational challenges to rebuild and rewire the country. Right now, we lack the foundational mines, mills and industry to do more than buy a lot of stuff from overseas. (Not to mention the declining standards of the U.S. educational complex.)

Sorry to hurt anybody’s feelings here. But we may as well be honest with ourselves. And if honesty leads to any Whiskey readers making some money, all the better!

On that note, I rest my case.

That’s all for now…Thank you for subscribing and reading.

Best wishes,

Byron King

Byron King
Managing Editor, Whiskey & Gunpowder
WhiskeyAndGunpowderFeedback@StPaulResearch.com

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Byron King

A Harvard-trained geologist and former aide to the United States Chief of Naval Operations, Byron King is our resident gold and mining expert, and we are proud to have him on board as the managing editor of Whiskey & Gunpowder.

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