Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Who Will Profit from the BP Gulf Oil Spill

Companies / Oil Companies Jun 03, 2010 - 06:05 PM GMT

By: Casey_Research

Companies

Best Financial Markets Analysis ArticleCharles S. Brant, Energy Correspondent, Casey’s Energy Opportunities writes: The disaster in the Gulf of Mexico may be the best thing that’s ever happened to green energy producers in the U.S – but the one that benefits the most will probably surprise you.


As the damaged Deepwater Horizon well continues to pump out 5,000 barrels of oil per day into the Gulf, all the major stakeholders are scrambling to find a way to contain the damage. Investors in BP, Anadarko, Transocean, and Halliburton have had a rough few weeks and should be nervous about the future. The growing political firestorm that’s accompanied this ecological disaster is drastically reshaping the energy landscape in the U.S. There’s huge money to be made from the biggest structural change to the energy markets in the past 50 years, if you know where to look.    

The political and economic fallout from this accident is starting to take shape, with the executives from BP, Transocean, and Halliburton being paraded in front of Congress for a public chastising. Predictably, politicians are making stern promises of tighter regulations in the future. 

At this point, it’s a guessing game as to what the new permanent regulations will be. So far, a temporary moratorium has been put in place on the issuance of new offshore oil and gas drilling permits. In addition, the Department of the Interior plans to restructure the federal Minerals Management Service (MMS) to eliminate the conflict of interest inherent in its role of monitoring safety, managing offshore leasing, and collecting royalty income.

The Department of the Interior has plans to make offshore drilling rig inspections much stricter. Interior Secretary Ken Salazar has also promised tighter environmental restrictions for onshore as well as offshore exploration and production. Lastly, in a knee-jerk reaction to the oil spill, the Senate Climate Bill gives states the right to veto offshore projects within 75 miles of shore.    

Although these regulatory changes aren’t set in stone yet, it’s a foregone conclusion that any company involved in offshore drilling will feel some pain. Any exploration and production company that continues to operate offshore will face reduced margins from a higher-cost structure from increased taxes, regulation, and insurance. 

Offshore production supplies a large amount of oil and gas to the U.S. The U.S. Energy Information Agency estimates that U.S. offshore reserves account for 17% of total U.S. proved reserves for crude oil, condensate, and natural gas liquids, as the illustration below shows.


Of the total known U.S. offshore reserves, the Gulf of Mexico accounts for 90%, with the rest found in California and Alaska. In 2009, BP produced nearly a quarter of all the Gulf’s oil and gas located in federal water. Shell and Chevron produced 12% and 11%, respectively. 

The sheer size of offshore reserves guarantees exploration and production will never be completely abandoned in the U.S., but don’t expect any growth. In fact, the Gulf of Mexico disaster probably destroyed any hope of any future drilling in environmentally sensitive areas, like the Arctic National Wildlife Reserve.   

The market has reacted strongly to the spill, punishing the stocks of every company involved in offshore drilling. Now many are suggesting it might be an overreaction that could benefit your investment portfolio if you dare buy in now. However, there are better ways to work this news to your benefit.

The oil spill will be a very expensive setback for all the players involved in offshore production; we’ve already seen that reflected in their stock prices. In the near term, offshore exploration and production companies and the oil services companies will show margin erosion as they digest higher costs. In the medium term, some companies will pull up stakes and move completely into non-U.S. offshore projects, as they’ll realize the cost of doing business in the U.S. outweighs any potential gains. 

The market might be overreacting, but we’re not convinced these depressed stocks represent good value. While it’s possible there are some good bargains, it’s still too early to consider speculating in any offshore-related companies. Specifically, the threat of increased regulation, massive tax increases, and rising insurance costs will create a hostile environment for these companies going forward.        

Instead of risking your capital on so many unknowns, a prudent alternative is to look at energy producers in the renewable energy sector. The oil spill has only strengthened the current administration’s resolve to make greener energies supply a larger chunk of America’s energy needs in lieu of traditional fossil fuels. Congress is doing its part by giving huge subsidies to companies in this field.

There are a lot of renewable options that will benefit from the subsidies and political wrangling, but our current favorite by a long shot is geothermal power. 

Of all the renewables, we think geothermal has the best upside potential. Based on economics and efficiency alone – unlike wind and solar energy, geothermal is reliable for round-the-clock generation and is already price competitive with fossil fuels without any subsidies – geothermal outperforms competing renewable technologies.

Add the government subsidies on top of the existing good economics and the pot gets even sweeter in the short term. Once the spill is finally contained, attention will shift to previously low-key renewables, like geothermal, and soon after the market will recognize geothermal as the clear winner.  

We’ve researched companies up and down the geothermal supply chain and we’re seeing value in a number of quality companies that we think are poised to outperform. With the coming flood of money and attention that will be focused on green energy, you’ll want to move quickly before these bargains go away.

Want to know which geothermal stocks are set to explode to the upside? Try Casey’s Energy Opportunities risk-free for 3 months today and gain access to one of the best energy analysts of our day, Marin Katusa. Marin and his energy team know all the inside details and have prepared a shortlist of the best companies to own. For only $39 per year, they will keep you in the loop on nuclear, geothermal and other renewable energies.

© 2010 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in