Offshore Drilling Ban Lifted: Oil Stocks to Fall?

In a day that could prove monumental in the history of this nation’s economy, the oil industry is already off to a bad start. Instead of working to quickly prop up our failing economy, our government is once again tampering with the country’s energy policy, forcing oil producers to make important changes to their operating strategy.

Last night, the Senate passed a measure that would allow the nation’s ban on offshore oil to lapse, increase renewable energy tax credits by $19 billion, lower taxes for some oil producers, and raise them for others.

And of course, it includes provisions to help the little guy. After all, it is a Democrat-controlled Congress. There is a line that helps Americans avoid the alternative minimum tax, as well as wording that sends money to hurricane victims.

Offshore Drilling Okayed?

Of course, the big headline maker in the new legislation will be the lifting of the offshore oil ban. It is already getting the attention of uninformed finger-pointers.

Before you go running to the corner gas station to watch prices plunge: We might see a slew of new laws bounce around in Congress, but nothing is going to happen.

The Senate’s new bill merely allows for the U.S. Minerals Management Service to have sole authority to oversee offshore drilling growth. It will be years until the agency can get anything accomplished. And by then, all of this political pandering for the November election will be over and a new set of do-nothing laws will be in place.

Do not get me wrong, there is good news in this bill. The fourteen people that will buy plug-in electric cars next year will get a $7,500 rebate.

If you are an oil investor, the legislation should get your attention, but do not expect your holdings to be jumping to new highs today. It is just the opposite. The potential new tax structure makes it harder for many firms to keep their revenues growing. We will see lots of share prices falling today.

The next step for the Senate’s big bill is the House, where it will get dissected into something unrecognizable to the current version. The tax hikes will remain, the concessions to voters will stay, but the fiscally responsible stuff that should be in there but may anger a couple of left-wingers will get taken out.

It looks to be another typical day in Washington. Keep a close eye on your portfolio.

Disclosure: none

Comments

[Bettyblue:]

If you believe in peak oil, it would be stupid to go drilling. Better to use the oil from the Middle East now, actually invest in some alternative energy, which, by the way would generate new jobs and prevent you guys from being destroyed by technologically more advanced foreign competitors (see US car industry). Once the oil price is high sometimes in the not so distance future, you might actually profit from that oil. But then again, Americans seem to be unable to think longer than 4 years into the future.

2008 Sep 24 06:11 PM

[john s. gordon:]

1. keep a close eye on your wallet, the u.s congress is in session.

2. yes pump arabia dry first, we should have done that 55 yrs ago (are you listening d.d.eisenhower?)
> jack

2008 Sep 25 08:40 AM

[Paul Killinger:]

No offense, but the Congress isn't PASSING any law at all that will allow for additional oil and gas exploration in the OCS. Rather, it's simply OMITTING this 27 year old annual moratorium prohibiting such exploration and production from its continuing budget resolution.

But before you run out and look for $2 gas at the pump anytime soon, consider this. If we elect a Democrat president in November, he will most certainly reinstitute the executive order reinstating the OCS moratorium as one of his first official acts.

2008 Sep 25 10:40 AM

[User 271157:]

ah, nothing like high oil prices to create high prices at the pump that create a higher cost of living which all induce a lower standard of living.

high oil prices will result in profits in the energy sector with an increase of profit losses in companies that use oil ie EVERY company.

i am an oil investor. but i also invest in other sectors.

everyone keeps screaming for alternative energy but when gov arnie wants to put a solar electric project in the desert: the hippies stop the whole thing because it 'may' endanger the habitat of a ground squirrel that lives there. so, please, dont give me the 'alternative' energy speech. all i know is that people are hypocrites and are crazy!

2008 Sep 27 01:03 AM