You’ve probably seen them before…
The BP commercials that reassure the American public that the company cares and that it’s “committed to the Gulf.”
I never really understood those commercials. Does someone at BP really think it’s worth millions of dollars to paint pretty pictures for us?
We’re not stupid. We know that oil production and consumption is highly pollutive, and the damage that was done in the Gulf will likely affect the good people of Louisiana for generations to come.
But we also know that a steady flow of oil is what keeps our economy moving. And certainly, we’re willing to trade the environmental risks for the multitude of benefits we receive from oil — particularly domestic oil.
If this wasn’t the case, you wouldn’t drive your internal combustion vehicle to work every day, and much more of our food and medicine would be delivered via rail and rickshaw. (OK, maybe not rickshaw, but you get my point.)
So with this in mind, I find it to be insanely ridiculous for oil companies to take all that time and money to tell us how they really do care about the environment.
Maybe they do, maybe they don’t. It’s irrelevant.
An oil company’s job is not to appease environmentalists. It’s to produce oil, cheaply and efficiently. That’s it.
So last week, when I saw that the American Petroleum Institute released a new study claiming the U.S. oil and gas industry spent more to mitigate greenhouse gas emissions than the government, I just shook my head.
It’s probably a load of crap, anyway. But even if it isn’t, does it matter?
Do these guys think that all of the sudden Greenpeace is going to send ExxonMobil a box of chocolates and a dozen roses? Do they think anybody who pulls into a gas station to fill up is going to feel better about having to pay $3.60 for a gallon of 87 Octane?
In any event, I do find all of this somewhat laughable.
But there is actually some truth to the claim that the domestic oil and gas industry has helped decrease carbon emissions…
A Little Chest-Pounding
To be honest, I’m not really interested in whether or not you’re a climate change denier or climate change believer. It makes no difference to me whatsoever.
But the reality is, with the transition of our domestic energy economy, the oil and gas industry can chest pound a bit on its part in reducing carbon emissions. Because aside from a slight decrease in energy consumption as a result of the recession, a wealth of new, cheap natural gas coming on the market has aided in the reduction of carbon-heavy, coal-fired power generation.
Sure, the coal industry isn’t happy about this. But even as King Coal decries new EPA regulations, the only thing that’s really cutting into coal’s market share is cheap natural gas.
And it’s that cheap natural gas that has aided in the reduction of carbon emissions.
That being said, the oil and gas industry’s role in this is not why investors are lining up to get a piece of this action.
It’s Not Going to Stop
Although I regularly champion rational environmental causes and long-term ecological health and sustainability efforts, I also understand that no form of power production is environmentally benign.
Sure, an increase in natural gas has certainly helped reduce carbon emissions. But there are also plenty of instances where the oil and gas industry has come up short on the environmental end. From highly destructive methane leaks to the illegal dumping of wastewater into the ground and nearby waterways, domestic oil and gas producers that are making a fortune from fracking must also contend with the few irresponsible producers that aren’t taking the appropriate safety precautions.
However, the actions of a few don’t reflect the industry as a whole.
Yes, there are still plenty of folks who will continue to fight the good fight against fracking (and it is their right to do so, whether we agree with them or not), but no matter how divisive the issue of fracking becomes, it’s not going to stop. The trade-off on potential environmental damage is just too great.
My Biggest Gains
In the world of investing, I’m known primarily for being one of the first to capitalize on the renewable energy boom that started about fifteen years ago. And I take great pride in that. Especially because I was able to help so many investors profit from the run on renewables.
Now while I’ve continued to profit handsomely from the renewable energy industry over the past couple of years, my biggest gains have come from the domestic oil and gas boom. And rest assured, this is a trend that is not going to peter out anytime soon.
In fact, I’ve actually been predicting that the U.S. will soon ramp up exports in an effort to profit even further from our bounty of this precious natural resource.
As I noted earlier this year, natural gas is going for as much as $12 per million BTUs in Europe and $18 in a few Asian markets. At those prices, there’s no way we’re going to leave all that money on the table.
When I wrote about this back in January, there were nine domestic producers lined up to get approval to export about 10 billion cubic feet of liquefied natural gas per day…
Last week, this is what Reuters published after a new export permit was issued:
The Obama administration on Wednesday authorized natural gas exports from a fourth U.S. facility, unexpectedly accelerating a review process that would-be gas exporters and their allies in Congress had criticized as too slow.
This speed at which the latest approval was reached — just five weeks after the previous project — puts the Department of Energy on a potential pace to rule on several more projects before year’s end.
This latest approval is for Dominion Resources (NYSE: D). This is the third of four approvals over the past nine months. And if you think for a moment that more approvals aren’t coming, you’re kidding yourself.
Now there are a few ways to play this…
There are obviously the infrastructure plays, particularly pipelines and gasification plants.
There are also the companies that are next in line to receive approval. Here’s a list of recently approved applications as well as those still under DOE Review.
And of course, the easiest and probably safest way to play this increase in exports is simply to load up on the producers.
To a new way of life, and a new generation of wealth…
Jeff Siegel for Wealth Daily
