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Oil Prices: U.S. Drought Hurting More than Crops

By , Contributing Writer, Money Morning -

The unusually warm and dry weather across more than half of the United States has resulted in one of the worst droughts in U.S. history. Much has been made about how the crisis will affect crops and cattle, but it could also alter oil production and prices.

With nearly 64% of the contiguous United States in a drought, the highest percentage since the U.S. Drought Monitor began recording such data in 2000, the economic repercussions are searing.

To date, 2012 has already surpassed 2011's $12 billion in drought losses, and this year is on pace to rival the droughts of 1980 and 1988, which endured losses worth a current value of $56 billion and $78 billion, respectively.

According to 70 years' worth of data studied by the National Center for Atmospheric Research, weather (from heat waves to cold spells to droughts) can cause up to a 1.7% rise or fall each year in the U.S. economy's gross domestic product.

Farmers and agricultural companies have been voicing concerns, now oil and gas companies are speaking up.

With farmers trying to hold on to every ounce of water they find, oil companies don't know how they will get the water needed to drill into their oil fields.

"Water is the key to unlocking oil and gas. We take it for granted," in the U.S., said Chris Faulkner, president and chief executive officer of Breitling Oil & Gas, which has numerous operations in several of the new shale regions.

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The "Sweet Spot": Goldman Sachs Bullish on Oil and Gas Pipeline Companies

By , Money Morning -


Nothing like having Goldman Sachs (NYSE: GS) confirm what we've already been saying for a year.

But last week, Goldman Sachs reminded us that they are bullish on the oil and gas pipeline sector by upgrading a number of portfolio stocks that have been prominent features of our portfolios and discussion on the sector.

Goldman analysts made headlines last week by adding a number of pipeline firms to their "Conviction Buy" list. The company added Williams Companies (NYSE: WMB) while dropping Buckeye Partners L.P. Nonetheless, Goldman still rates Buckeye as a "Buy."

Goldman also raised a number of additional stocks to the buy list, including Plains All American Pipeline LP (NYSE: PAA), and maintained its "Buy" ratings on Enterprise Products Partners (NYSE: EPD), and Enduro Royalty Trust (NYSE: NDRO), and Magellan Midstream Partners (NYSE: MMP).

The reason for these moves shouldn't be a surprise to anyone who follows us at Oil and Energy Investor.

The Sweet Spot in Oil and Gas Pipeline Companies

It's not surprising that Goldman Sachs is so bullish on the pipeline industry. After all, my colleague Dr. Kent Moors has been touting the best known secret on the markets for more than a year.

If you want to make money in energy investing, you want to park yourself right in the middle of the supply chain. By doing so, you're far less susceptible to price fluctuations in the underlying commodity, and you are able to collect easy profits from the growing demand in fuels.

Midstream companies, those that connect the upstream exploration and production companies to the downstream retail, refining and marketing channels, provide vital services in transportation, storage, and processing.

Simply put, this is the "Sweet Spot" of energy investing.

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