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Tuesday, September 02, 2014

Is It Time To Sell Energy Stocks Short?

Coal accounts for 43% of the grid energy in the U.S. and, perhaps more importantly 81% in China and 68% in India. Even India though, where growth has long taken precedence over environmental concerns, is looking to reduce coal consumption and since 2008, has adopted a National Action Plan on Climate Change.

Obviously the world is looking to move away from coal as such concerns become more commonplace. At the same time alternative energy sources are becoming more readily available and economically viable, so the end of expansion for the coal industry at least is in sight. It would be reasonable, then to expect coal stocks to be cheap, but many are far from it; in fact some are just downright expensive.

Then, there are the oil companies. Their products are just as doomed. And, the market is valuing them on the value of their inventory in the ground. But, what if the human race suddenly came to its senses and realized that burning fossil fuels is a death sentence for the planet? What if legislatures passed laws prohibiting the oxidation of fossil fuels? The oil in the ground would then only be worth its usage outside of burning, such as for making plastics and fertilizer, for example.

Oil, gas and coal stockholders are definitely “cruisin' for a bruisin'” at some point.