Oil Price Manipulation Awakens Libor, Enron Ghosts
Last July, we warned you that oil prices could potentially be manipulated in similar fashion to the London Interbank Offered Rate (Libor), and now a recent raid of major oil companies highlights this growing danger to the $3.4 trillion-a-year crude market.
The European Commission last week stormed the offices of Royal Dutch Shell PLC (NYSE ADR: RDS.A, RDS.B), BP PLC ( NYSE ADR: BP), and Statoil ASA (NYSE ADR: STO) as part of the ongoing investigation to find out whether companies are manipulating oil prices and, if so, how long it has been going on and the possible ramifications.
"The commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency (PRA) to manipulate the published prices for a number of oil and biofuel products," the EC said in a statement.
Besides major oil companies, big banks are active in the energy market and would likely benefit from any manipulation, David Frenk, director of research at the financial reform group Better Markets and a former commodities analyst, told CNN.
The ordeal has brought back memories not only of last year's Libor scandal but also of the actions taken 12 years ago by Enron to control energy prices.
The Next Big Change in the Energy Markets
Thoughts are again turning to the next big change in the energy landscape.
As it unfolds, I have been working on how to exploit this trend and will be rolling out my recommendations when I appear at the MoneyShow in Las Vegas next Tuesday and Wednesday.
Of course, before I sketch my new approach to the Caesar's Palace audience, I'll outline it here first. You can expect more on this in coming Money Morning editions.
Today, I want to extend on Saturday's discussion and set the stage for the revisions I will be begin sketching out in my next article.
This is once again about hedging.
10 Ways the U.S. Shale Oil Boom has Made North Dakota an "Economic Miracle"
Thanks to the U.S. shale oil boom, some parts of the country are experiencing growth comparable to emerging markets.
The best example of this high-powered economic surge is in North Dakota.
North Dakota is the epicenter of the Bakken shale oil boom. Since 2009, it has had the fastest growth in personal income, tax revenues, jobs and home prices of all the 50 states. The state also has enjoyed both a population surge and the lowest unemployment rate in the country.
According to July 2012 figures from the U.S. Census Bureau, the state's population rose by 4% in just two years – compared to 1.7% for the nation as a whole. The western part of the state, where the Bakken is located, may see its population jump 50% over the next two decades, according to a North Dakota state survey.
For North Dakota as a whole, at the end of 2012 the unemployment rate was only 3.2%. In the 12-county Bakken region of the state, unemployment stood at a mere 1.8%. In Williams County, which is at the heart of the Bakken shale oil boom, unemployment was at a miniscule 0.9%
This is why some have called North Dakota an "economic miracle."
Frack or Fail: Is It Time For California's Liberals to Go?
Editor's Note: California is in a LOT of trouble financially. Cities are going under and the state can't balance its budget. It also has almost half a trillion in state pensions to fund and revenue is drying up.
But there is one way out: Tap the largest oil and gas play in the Lower 48.
The question is whether this left-leaning state crowded with special interests like the Sierra Club will actually let oil services companies begin to start fracking on state land.
In our inaugural Money Morning Fight Club brawl, Frank Marchant and Garrett Baldwin square off on this contentious issue. The best part is we are asking you to turn in your scorecard and pick the winner at the end.
So let's get ready to rumble…
The Untold Truth About Solar Stocks
The price of solar energy shares has been spiking, leading to the obvious parallel questions:
Is it sustainable?…Or what prospects exist for the average individual retail investor?
Before we address these questions, it would be best to lay some groundwork.
The increase in solar share prices has been just about across the board. This is most clearly seen in the rise in solar and related exchange traded funds (ETF). Guggenheim Solar (NYSEArca: TAN) has advanced 24.8% this past month, while American Vector Solar Energy ETF (NYSEArca: KWT) is up 15.2%. The iShares S&P Global Clean Energy Index (NasadqGM: ICLN) has improved 11.8%.
However, before you rush out and buy any of these ETFs, consider the longer view.
From December 1, 2012, TAN is down 36%, KWT is off 34.9%, and ICLN is weaker by 10.7%. The recent push up has resulted in some – apparently – better solar plays. Yet the medium-term perspective indicates the run up might not last.
This Dangerous "New" Energy Crisis is Crippling the Middle East
Don't look now, but there are some problems developing in the global energy network.
It's hardly reassuring that the epicenter of all this is the Middle East.
The primary problem is hardly new. Actually, calling it an "old" problem is more accurate because the culprit is a collapsing network of delivery and storage that has been deteriorating for decades.
Unfortunately, this is hitting areas already beset by broad, accelerating economic shortfalls the hardest. That they also happen to be areas of significant unrest hardly improves the situation.
The latest is in Pakistan. There a combination of lower-than-expected water availability and a government powerless to provide the diesel fuel essential for the planting season means a population already on the brink is staring at food shortages.
The picture is very grim.
The Market for Clean Energy Investments Continues to Move East
While renewables and other "clean" energy solutions continue to lose steam with investors in North America, it's quite another story elsewhere.
Investment capital is moving east at an incredible pace.
Last week, the Pew Charitable Trusts issued the fourth annual "Who's Winning the Clean Energy Race?"
Worldwide, nations increased clean energy generation capacity by 88 gigawatts (GW) in 2012. However, that also complemented an 11% decline in overall investment compared to 2011.
Some of that is explained by the impending end of heavy government subsidies in both the U.S. and the European Union. But despite the drop, 2012 still marked the third straight year in which clean energy investments topped $200 billion worldwide.
The year still ended with more than five times the investment recorded in 2004, the year generally used as the base for calculations.
Dr. Kent Moors: How to Invest in Clean Energy
Due to declining subsidies, clean-energy investments have been on the wane in North America and Western Europe.
But according to Money Morning Global Energy Strategist Dr. Kent Moors, clean energy development is far from dead. Instead, Kent says clean-tech investments are moving eastward to, among other places, China.
"This is going to be a long, drawn-out rollout process. We're seeing the technology itself and the investment interest itself [in clean energy] moving to new areas of the world," said Dr. Moors, appearing Monday on CCTV News.
To see what else Dr. Moors had to say along with the three clean energy exchange-traded funds that he currently recommends, watch the video below.
The "Hybrid" Approach is a Great New Opportunity for Energy Investors
In places where energy supplies face the most pronounced crunch, they need to integrate energy sources in a more seamless manner.
It's a no-brainer and one element in the "new energy balance" that I have discussed over the past year.
This balance is less about finding a silver bullet (a breakthrough technology) than about finding a more efficient way to combine existing sources.
As this balance works itself out – sculptured by necessity, profit, competition, and innovation -more segmented sources of energy, each satisfying a portion of required demand, will come online.
Instead of looking for a replacement for crude oil, we must find a better way to integrate the entire energy spectrum to satisfy this new energy balance.
The most basic part of this is an ability to exchange energy sources, thereby enabling users to offset supply problems or availability considerations by rapidly exchanging sources. Certainly, some bottlenecks will exist in this process, and, in some cases, the balance remains elusive.
But where the process is already underway, there's a great opportunity for investors.
How to Play by the Rules and Beat the Tax Man with MLPs
Paying taxes is about a pleasurable as a root canal. It's hard not to think about all that money going bye bye.
But it's inevitable and there's nothing we can really do about it, I guess.
However, tax day does bring to mind something quite a bit more positive: Like how to make money in the energy sector.
Actually, that's not as much of a stretch as you might think. That's because the bridges are already in place between how taxes are paid and energy returns.
Right about now, some of you are probably thinking I will start talking about energy sources like renewables that survive on government tax concessions.
Or perhaps you might think this is going to be a discussion of tax write offs for certain field projects that utilize public land.
And unless you are prone to the more fanciful, your thoughts should not be wandering toward squirreling money away on a small island somewhere.
Because there has been a much more practical approach that's been generating success for a while now.
This is how you play by the rules and still beat the taxman in Washington.