Finally, Some Straight Talk on Energy

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In an era when plain talk has value, BP (NYSE: BP) CEO Tony Hayward delivers exactly that in an op-ed in London's Financial Times to discuss some of the issues -- and myths -- surrounding what could morph into a worldwide energy crisis. And while BP is the second-largest Europe-based oil company behind Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B), it's also a major refiner in this country, and the largest U.S. natural gas producer -- although soon it could be passed by Chesapeake Energy (NYSE: CHK). So his words clearly have meaning on this side of the pond as well.

Hayward centers his piece on three key myths:

• that high prices are caused by technical factors, such as speculation.
• that the world is running out of hydrocarbons.
• that we can switch quickly to a low-carbon economy.

Looking at the first of the myths, he builds a solid case for the circumstance that so many observers are keen to dismiss: that global demand appears to have pulled ahead of the ability of suppliers to keep up. The demand delta has, of course, been largest in emerging nations where fuel prices are subsidized, "such as China, India and -- increasingly -- the oil-producing nations themselves." In contrast, there has been a slowing of production in places like the U.S., the North Sea, and now Russia.

He also notes that "resource nationalism is on the rise" and is thwarting access to resources for BP and its western, private-company peers, including the likes of ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), and Total (NYSE: TOT). The problem there is that the majors have a decided technological edge in the quest for hydrocarbons.

His overall solution for expanding supplies is a market-based, cooperative effort between the companies and governments, with the governments doing their bit "by removing the barriers to investment, improving access to resources and modernizing the tax structure we work in."

Wonderful. And good luck, Tony, in getting government cooperation on this side of the Atlantic. Indeed, in an era when attractive prospects are becoming scarce and most operators are watching their production slide, all too many U.S. politicians view slapping punitive taxes on the companies as a solution to our worsening crisis. Further, in the midst of a one-year doubling of crude prices, most in that tax-happy lot are digging in their heels against drilling on our Outer Continental Shelf. 

All this, it seems to me, is a prescription for Fools to be sure to build a sound energy foundation under their portfolios. Of the names mentioned above, Chesapeake, Total, and ExxonMobil are my favorites.

For related Foolishness:

• It's Official: BP Means Better Production 
• The Market Can't Handle Skyrocketing Energy Prices
• Can ExxonMobil Get Back to Business Now?