The Energy Industry Has Election Fever
Energy and Capital's Weekend Edition
The winner of Tuesday's presidential election has been highly anticipated for over a year — and for good reason...
The results will affect multiple industries.
In fact, they're already starting to make their mark.
Gold received an early boost thanks to continued monetary easing by the Federal Reserve, though those gains will be checked by the instability of the fiscal cliff.
ObamaCare will officially kick in with the players in the White House, Senate, and House sticking around.
Whether or not the government will be able to avoid the fiscal cliff has been a major point of concern in the financial markets...
And the energy market is already revealing its sentiments and predictions: The outlook for coal is dismal, but other sectors could really get a boost with Obama and his administration at the helm for the next term.
During his first term, Obama led the EPA restrictions on carbon emissions, a move that required coal companies to invest in carbon capture and sequestration technologies. Though roughly 70% of the coal-fired power plants in the United States are more than thirty years old, this legislation will make it too expensive to build new ones.
Romney, a major advocate for regenerating coal in America, had plans to remove carbon regulations to make construction of new coal plants easier.
Reacting to the results of the race, the Market Vectors Coal ETF (NYSE: KOL) lost 4.2% between close on Tuesday and Wednesday morning.
Other major coal companies dipped as well: Peabody Energy (NYSE: BTU) lost 9.4% and Alpha Natural Resources (NYSE: ANR) is down 12.2%.
Unless Obama changes his stance on coal, the industry could suffer further.
On the other side of the energy spectrum, renewable companies could have a lot to look forward to. A second term for Obama means a chance at the renewal of the wind power production tax credit (PTC), which has allowed the U.S. to reach 50GW of wind power this year.
Wind companies have laid off hundreds of people in at least 17 states this year as they've pared back in preparation for the expiration of the PTC that makes their operations economically feasible:
The renewal still has to pass in Congress, but it was approved by a Senate Finance Committee and now has the support of the president.
An approval could bring those jobs back — and create even more.
Natural gas could also receive a boost. With the heavy regulations on coal-fired plants, natural gas plants are the most likely substitution. A number of coal plants have already switched to natural gas after prices plummeted this past spring, making natural gas much more attractive than coal from a cost perspective.
Obama has also given his support to natural gas-powered vehicles. The resource is abundant in the United States, cleaner-burning than gasoline, and significantly cheaper.
A number of states are already working with major auto dealers to build up fleets of natural gas vehicles, and Clean Energy Fuels Corp. (NASDAQ: CLNE) is building natural gas fueling stations along major highways across the country.
Support from the president could increase natural gas demand — a big help to companies suffering from low prices.
The future of oil is less clear...
On the day following the release of the official election results, oil suffered its biggest drop since last December, falling $4.27 to $84.44 on the NYMEX for December delivery.
Part of Obama's campaign pledge was to cut subsidies for oil companies. And he has yet to decide his stance on the fate of the Keystone XL Pipeline, which he rejected earlier this year. Analysts suspect he'll approve it the second time around — and oil began to move back up after Wednesday.
But the election wasn't the only thing that send oil plummeting...
Greece voted on austerity measures on Wednesday, and fears eased Thursday after a number of the measures passed.
Though Obama had once prepared to open up new lands for drilling, efforts were cut short by the BP Deepwater Horizon blowout in the Gulf of Mexico.
The market has been holding its breath for the election results. Now that they're here, the next four years have become a little clearer.
One thing's for sure: Unconventional shale development won't slow down.
It's sped up monumentally in the last four years, and areas like the Bakken and Eagle Ford Shales are breaking their own oil and natural gas records every month.
We can expect to see explosive growth in domestic oil and gas as other sectors shake out after the election dust settles.
for Energy and Capital
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