Keep an eye on InterOil & George Soros

Ed Lasky

Are Barack Obama's energy policies influenced by hedge fund billionaire and political patron George Soros?

The administration is derailing oil and gas exploration and development here in America while taking steps to help foreign nations develop their own energy resources. The latest beneficiary of his efforts is the island nation of New Guinea.

This effort by the administration is especially galling since the Interior Department has been blaming its delay in issuing drilling permits on lack of money and staff to process the permits. Why devote the department to helping another nation reap riches?

To which one may also ask — why New Guinea?

Perhaps the better question might be: Who benefits from President Obama's push to help Papua New Guinea become an energy power?

That answer would be George Soros, sugar daddy of the Democratic Party and long an ardent and very generous supporter of Barack Obama's political campaigns. Soros stands to massively benefit if New Guinea becomes an energy exporter and will profit even more if American taxpayers pick up the tab for the costs of such help.

George Soros has a huge ownership interest in a company called InterOil, whose one major asset is reportedly a huge reservoir of natural gas in New Guinea. He has been increasing his ownership interests in recent months and, as of last November, showed an 11.9 percent ownership stake. His InterOil holding is the third-largest stock holding in his hedge fund.

InterOil has been subject to some controversy -- there are some investors who are shorting the stock, thinking that the reserves might not be as large as claimed and that it will be very difficult to develop them given the problems with developing energy resources in such an undeveloped nation and the heavy expenses overcoming those problems entails.

The stock has been soaring upward, along with the rise in energy prices. The move might also be related to the prospect that Japan will rely more on liquefied natural gas (LNG) imports (from Asian nations such as New Guinea) to power its economy in the wake of its nuclear energy problems.

But there might also be a short squeeze propelling the stock upward. This occurs when people sell the stock short. Shorting happens when investors think a stock will fall in price. They borrow the stock from others and then sell it. They hope to be able to replace the stock they borrowed by buying it back in the market after the stock price has declined. They profit if the price they pay to buy it back (and return it to the people they borrowed it from) is lower than the price at which they sold it.

The nightmare for short-sellers is when the price of the stock moves contrary to what they hoped and it moves up. Then the pain and bloodletting starts. They might face margin calls. They have to see their shorts decline in value as the stock price moves up. They might eventually be forced to buy back the stock at ever high prices.

Sometimes, if there is a large short position in terms of the percentage of the stock float, serious pain ensues as the stock shoots upward when they are compelled to meet margin calls and cut their losses.

Being caught on the wrong side of a short squeeze is akin to being subject to the Wall Street equivalent of water-boarding.

Meanwhile, those who own the stock (are "long" the stock) are happily counting their riches as the value of their stock soars.

How can a short squeeze be engineered? Among the tricks of the trade is publicizing positive news.

In the case of InterOil, the market is keenly aware that American taxpayers picking up the costs for helping New Guinea exploit its reserves will disproportionately benefit InterOil.

To compound the problem, America has vast reserves of natural gas that we can export. Ports built to import LNG can be repurposed to export LNG. Why build up a competitor to our own domestic energy industry? Furthermore, since China and Japan would be the prime beneficiaries of New Guinean energy exports, why not have them subsidize the costs?

But there is, of course, one other prime beneficiary of this wasteful and foolish use of taxpayer money to pay the costs so someone else may profit -- InterOil and its major shareholder, George Soros.

Ed Lasky is news editor of American Thinker (www.americanthinker.com).