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Permalink Reply by Antsu-in-Japan on November 6, 2008 at 3:50

Please enjoy...

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Natural Gas May Get a Boost from Obama

Reuters | 05 Nov 2008 | 11:57 AM ET

The election of Democratic Sen. Barack Obama to the U.S. presidency should be a boon to natural gas producers, but the forecast is turning dark for oil and coal industries already coping with falling prices.

The potential regulation of carbon dioxide emissions and the threat of a "windfall profits" tax on oil majors such as Exxon Mobil [XOM 73.74 0.05 (+0.07%)], Chevron [CVX 74.70 -0.18 (-0.24%)] and ConocoPhillips [COP 52.97 -0.49 (-0.92%)] have been two major themes of the Obama campaign.

Both moves could erode the massive profits those companies have posted on the back of high crude oil prices, industry experts said.

High oil prices usually benefit companies such as Exxon, which last week set a U.S. record by posting quarterly operating profit of $13.4 billion, but Obama's proposals have prompted some analysts to warn investors away from the sector.

"We believe that some of the Obama policies, such as a windfall tax on energy and full CO2 auctions, may lead to a negative result for the industry if (he is) elected," analysts at Sanford Bernstein said in a pre-election note to investors.

Obama, who became the president-elect in Tuesday's vote, campaigned on a platform of increasing fuel efficiency in the U.S. auto fleet and reducing crude oil imports that make up about three-quarters of the nation's supply.

The Illinois senator, like his vanquished Republican rival Sen. John McCain, supports a trading system that would set prices for companies to emit carbon dioxide.

That policy would hurt Massey Energy [MEE 18.80 -0.91 (-4.62%)], Peabody Energy [BTU 29.58 -2.74 (-8.48%)], Arch Coal [ACI 19.36 -1.26 (-6.11%)] and other producers of coal, long one of the cheapest forms of energy in the United States and the source of half the nation's electricity.

That could be an opening for the natural gas industry to boost its 20 percent share in the nation's power generation portfolio and even move into the automobile markets.

As a result, natural gas producers like Chesapeake Energy [CHK 24.64 -0.19 (-0.77%)] had viewed an Obama presidency with optimism.

"This administration will be very favorably inclined to try to do something about introducing natural gas into the transportation network in a more aggressive way than what has happened in the past four to eight years," Chesapeake Chief Executive Aubrey McClendon told analysts last week.

While the major oil companies also produce substantial amounts of natural gas, others, such as Devon Energy [DVN 75.64 -4.12 (-5.17%)], Apache [APA 78.71 -1.71 (-2.13%)] and Canada's EnCana [ECA 50.85 -0.48 (-0.94%)], are more focused on the fuel.

Although substantial hurdles stand in the way of boosting the role of natural gas as an automobile fuel, its emissions are half those of crude oil and coal.

Obama has endorsed cleaner coal technology that would remove pollutants such as carbon dioxide and allow them to be stored, but that technology has not been tested on a commercial scale, and widespread deployment remains years away.

Congress earlier this year canceled a planned test power station because of soaring costs to build it.

LOWER OIL PRICES, NEW ATTITUDE?

Obama, like many other Democrats, initially opposed opening new areas for drilling, but softened his stance to support some moves in that direction as crude oil raced to a record above $147 a barrel and retail gasoline to more than $4 per gallon.

But a sharp pullback that has sliced more than 50 percent from the price of oil since July could move the new president away from that pledge.

"Prices were high, and you had to appear like you had some sort of a plan," said Michael Cuggino, chief executive of Pacific Heights Asset Management in San Francisco, who manages about $3.8 billion. "I don't believe they ever really expected to enact it."

Obama's plan to provide families with a $1,000 tax rebate and pay for incentives for renewable energy sources with a windfall tax on oil company profits could support oil prices if companies are forced to reduce spending to develop new fields, analysts said.

"I think in general an Obama victory and a Democratic legislature will probably be somewhat bullish for energy prices because of some of their apparent effort to favor alternative energy sources," said analyst James Halloran of National City Private Client Group.

Because of the possible increase in taxes, oil companies' stock performance may not capture all of that potential bullishness, he added.

Still, if oil prices stay at current levels of nearly $70 a barrel, producers of the fuel may be better able to steer clear of the negative publicity of recent months and present their case to the new administration and Congress.

"If the economy is healthy and oil prices are low, there's going to be less ill will," said Ken Medlock, a fellow at the Baker Institute at Rice University in Houston. "And they will be free to lobby for more."

Copyright 2008 Reuters.

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Permalink Reply by P.G. on November 6, 2008 at 4:27

Now if Obama will just get off his support for grain ethanol subsidies and mandates! Folks still have to be able to afford to eat!
The higher meat prices go, the less protein and the more carbohydrates folks eat and become fatter, thus, more unhealthy!
We wouldn't need to use ethanol if NG became the primary fuel!

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Permalink Reply by Grice on November 6, 2008 at 4:41

I do not foresee his support for ethanol being abandoned. However, I do believe it will diminish over time. There are many lobbyist for all forms of energy future. To kill one, and praise the other(s) would be political suicide.

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Permalink Reply by P.G. on November 6, 2008 at 7:15

Other than grain farmers, I'd bet there would be a lot of folks happy with lower food costs!
I would figure that would put a plus on his side with the regular folks!

Using food for fuel is like using part of your house to burn in the fireplace for heat!
They need to stop that nonsense!

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Permalink Reply by Lawrence Edwards on November 6, 2008 at 5:04

Read what Obama has to say about establishing an energy policy that lessens dependence on foreign oil and increases dependence on domestic energy sources. Go to the following website:

http://www.barackobama.com/pdf/factsheet_energy_speech_080308.pdf

I am glad that we will now have a President who is at least talking about the future of energy usage in our country. For our children's sake lets get behind him.

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Permalink Reply by P.G. on November 6, 2008 at 7:25

Where do they mention anything about using Natural Gas?
That cap and trade is going to make energy expensive!
Making the energy companies pay for rebates to offset prices at the pumps will discourage production.
Picken's plan makes more sense to me!
Plug in cars will have to get that electricity from somewhere!
If Obama is going to hit the electric generating companies with a large carbon tax, guess who it will be passes along to?
Their plan just doesn't look realistic!

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