Energy
EPA Official Resigns over Crucifixion Comments
On Friday, we discussed the regulatory philosophy of certain Environmental Protection Agency officials in how they regulate the U.S. oil and gas sector.
Dr. Alfredo Armendariz, the EPA regional administrator for Region 6, was overly candid in a 2010 policy discussion in which he said that the agency's stance is to "crucify" a few oil and gas companies in order to set an example and force the rest of the industry to submit to new rules.
"You make examples out of people who are not complying with the law," he stated.
Now, it looks like those comments have cost him his job.
Morgan Little at the LA Times explains.
"Alfredo Armendariz, a regional administrator for theEnvironmental Protection Agency, has resigned in the wake of criticism for comments made in Texas two years ago comparing the methods of the EPA to those of Romans using crucifixions to conquer foreign lands."
The resignation is certainly a starting point in order to limit the political damage.
There's Always Money in this Fund
It's a tricky market out there for energy investors.
Even though opportunity abounds, there are plenty of factors driving ordinary investors away from the market, like global political tensions, ongoing concerns about available supplies, credit limitations for producers, increased volatility on the derivatives markets, and rising global demand.
There's a lot of noise, and short-term irrationality is trumping fundamentals.
But even amid the confusion, we know one thing for sure.
The price of oil is going to accelerate.
As Kent said on Monday, we have a very different dynamic taking place in the markets from the events of 2008. Three years ago, speculation drove oil prices, but an outside crisis decimated the global markets (namely, the subprime mortgage mess and the corresponding credit freeze).
But this time, we're experiencing a constriction produced by a significant cutback in new oil drilling. With greater unconventional production in the cards and greater concerns about the availability of supply, we're witnessing a perfectly predictable storm of events that will drive prices higher.
Still there's one thing that Kent and I continue to stress before you go out and start buying up energy stocks. That's this:
Rising oil prices will not drive similar performances in all energy companies.
You need to grasp an overall strategy to profit this time around.
The lack of cheap supplies and the cost of procurement in unconventional sources are major concerns. So is the acceleration in short-term swings in volatility. We are entering a period of boosted unconventional oil and gas production to tackle these challenges.
Access to unconventional sources has set off an energy boom here in the United States, as new technologies have enabled this country to greatly improve its oil and gas sourcing. Moving forward, the United States will look to its oil and gas shale plays and to source an expanding fuel supply from our neighbor to the north: Canada.
But it won't be cheap to do this, especially while increased swings in volatility become the norm.
So what's the best way to play volatility while managing your risk?
Start Seizing Master Limited Partnership (MLP) Profits
Last week, Kent challenged me to offer you a way to make some money in energy.
I started scanning the energy and agricultural stocks I monitor, and began combing financials, looking for some undervalued little company about to pop.
Then I stopped.
I already knew a failsafe way to ace Kent's challenge. And so do you. We talk about it all the time.
It's the midstream sector of the energy supply chain, particularly in Master Limited Partnerships or MLPs
And it's the best and easiest way to make money in energy today.
I want you to understand the value of these companies that are involved in the gathering, transport, and storage of oil and gas. Not in terms of just how important they are to the industry, but also how important they can be to generating very strong returns for your wallet.
Because if you're ignoring them, you're missing out.
Big time.
That's why today I'm going to share with you one investment opportunity in Kent's Energy Advantage portfolio that is blowing the doors off and making investors a killing.
And you can join in.
MLPs: The Golden Age Continues
The United States is in the early stages of one of the greatest financial booms in its history.
Technological advances in horizontal drilling have allowed companies to access natural gas and oil resources once thought to be unattainable.
Upstream gas drillers continue to develop shale deposits in Pennsylvania, New York, Utah, and other states. So someone has to take care of all the gathering, feeder and transport pipelines, terminals, storage facilities, fractionating, and initial processing of these fuels.
This is what has made Master Limited Partnerships (MLPs) such attractive opportunities.
These midstream companies make their money by charging transport fees for the fuels they process. And over the past few years, these fees have remained almost constant, even though natural gas prices have dropped considerably.
MLPs offer investors the opportunity to make profits in two ways.
- The stock appreciates in value, due to growth in the sector and strong financial returns.
- The stock pays higher-than-average yields and quarter distributions to investors (otherwise known as dividends).
The yield benefit is driven by the fact that all company profits are distributed directly to partners and the investors, bypassing corporate taxes.
And when we identify MLP plays that do both at the same time, that's when we really start to see some profits.
A 139% Return in Under Three Years
MLPs are attractive investments. So are the indices that track their overall performance.
And for the last 18 months, Energy Advantage readers have benefited from growth of one fantastic index.
The JPMorgan Alerian MLP Index ETN (NYSE: AMJ) tracks the performance of the booming energy MLP sector. Created in 2009, the market cap-weighted index currently pays an attractive yield of 5%, while the underlying share price has doubled in a little less than three years.
The index offers many of the same benefits of investing in a traditional MLP. The two biggest benefits are those opportunities to acquire a strong yield and to reinvest those dividends into appreciating shares.
This two-step process unleashes the power of income investing.
Just how much potential are we talking about?
Premium
The Keystone Delay Won't Stop These Canadian Oil Sands Stocks
I'm not a knee-jerk hater of the Obama administration.
But the President's decision to reject the Keystone pipeline was one of his worst.
Aside from creating jobs, the pipeline would have decisively swung U.S. energy supplies more toward domestic sources and those of our friendly neighbor Canada.
Granted, the pipeline wouldn't create energy independence but it would mean importing less oil from the Middle East.
It is the kind of switch that could help save the U.S. large amounts of blood and treasure in the future.
Because in practice, our dependence on Middle Eastern oil forces us to incur huge foreign costs – after all, we just finished paying $800 billion for the Iraq war. As you know, that is just a drop in a much larger bucket.
Add in the human losses and the costs are incalculable.
In this case, caring less about what goes on in the Middle East – other than ensuring the safety of our ally Israel – would save us all those costs, and get us that much closer to balancing the damn Federal budget.
So let's just say shelving the Keystone pipeline wasn't exactly the president's finest hour.
Bullish on Canadian Oil Sands Stocks
However, while the Keystone Pipeline continues to twist in the wind, investors shouldn't ignore the Canadian energy sector – especially the Athabasca tar sands.
Because with oil prices on the rise, these Canadian resource plays are likely to offer investors serious returns.
Here's why: oil prices are headed higher.
In fact, Fed chairman Ben Bernanke's recent promise that U.S. interest rates will remain near zero until the end of 2014 has given a huge boost to commodity and energy prices.
What's more, the $600 billion injection into EU banks and the promise of another $600 billion this month just adds more fuel to the inflationary flames.
Eventually, oil prices will get so high that they will cause a recession all by themselves, just like they did in 2008. But remember, that happened at $147 per barrel, so we've still got quite a way to go. This time oil could get closer to $200 per barrel.
That's bullish for places like the Athabasca tar sands.
Gasoline Price Outlook: An Epitaph For Sam the Service Station Man
[Editor's Note: In today's essay, Dr. Kent Moors - a frequent Money Morning contributor and a consultant to some of the world's largest oil-producing nations - relates a personal anecdote that provides some real insight into his gasoline price outlook. Dr. Moors' story certainly explains why he expects gasoline prices to head even higher.]
I am a great believer in the American entrepreneurial spirit. In fact, the U.S. economy stands or falls on our ability to provide enough space to allow small folks to have big-time dreams.
However, when times get difficult, some little folks end up under the bus – along with their dreams.
To understand what I mean, let's take a look at my friend Sam.
Many of you may remember Sam, the proprietor of an out-of-the-way rural service station situated outside of Pittsburgh. I introduced him to Money Morning readers last summer in an essay: Gasoline-Price Forecasting: What Sam the Gas Station Owner Knows That We Don't.
I've known Sam for years.
So I was stunned to discover that he's throwing in the towel.
To understand what this means for gasoline prices, please click here…
Uranium Prices: The Top Three Ways to Play the Nuclear Power Surge
Uranium prices have gained more than 70% from their recession bottom. And that's only the beginning. The element is bracing for a super-surge, and we've found three ways to profit from this uranium bull market that could continue to rise through the rest of the decade and beyond. Uranium is heading back toward its historic [...]
2011 Oil Prices Prompting Energy Consumption Concerns Among Readers
[Editor's Note: Last week we asked readers if they were worried about the soaring price of oil. A collection of comments is listed below, along with next week's question, "Have You Dived Into the Mobile Computing Era?"]
With oil prices moving higher, consumers are already fretting about how much it's going to cost them to fill their tanks. And given the current outlook, that cost is going to head even higher – meaning there's no relief in sight.
The political mayhem in Egypt is the latest oil-price catalyst to appear, and is yet another candidate to help push 2011 oil prices closer to the predicted $150-a-barrel level. Analysts worry that Egypt's chaos could disrupt the millions of barrels of oil that pass through the Suez Canal.
Traders' main unease is that the political unrest in Egypt is something that could occur in neighboring countries – especially those with a much bigger influence on the global oil exporting market.
U.S. Stock Market Forecast: Tech, Energy, Commodities and Gold Are Top Plays For 2011
[Editor's Note: This special report on the stock-market environment that U.S. investors will face in the New Year is part of Money Morning's annual "Outlook" series, which is reviewing prospects for the U.S. economy, world currencies, oil, gold and other top profit opportunities in 2011.]
The outlook for the U.S. stock market in the New Year figures to be an exasperating mixture of promise and peril. Positive momentum is building going into 2011, but so are dangerous bubbles.
The high-tech, energy, materials and commodities sectors will be hot in the New Year. And the U.S. stock market will get an added boost from the fact that U.S. Treasuries, municipal bonds (munis) and euro-based investments will not.
Here's what's in store for the U.S. stock market in 2011.
For the most complete stock-market strategy you'll find anywhere, please read on…
Bixby Energy Systems Catches China's Eye With Coal Processing Technology
[Editor's Note: We want to hear from you! Do you have a comment, suggestion, story idea or a question? Let us know at mailbag@moneymappress.com. (**) And be sure to check back for responses to reader questions and comments.]
As energy policies become more of a global financial and environmental concern, a clean energy company that can successfully develop "green" technologies will be at the forefront of the next energy industry investment wave.
A comment sent in from a Money Morning reader recently addressed a new coal processing technology developed by a U.S. company to make headlines this year.
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