As Dems Target Oil--Where Do Investors Go?
Big oil. It's a big issue for Democrats on Capitol Hill and one of their announced targets for reform. Today-they're taking up the issue in the House. They're "after" oil they say because of record company profits and high gas pump prices.
What are they proposing to do? They want to raise $12.7 billion for research in alternative energy sources. To do that, they want to eliminate some $6.6 billion in oil company tax breaks and get another $6.1 billion from increasing oil production royalties. This is what they say is a correction to the 1998-1999 oil deal worked out during the Clinton administration. (some $2 billion dollars in royalties have been lost to the U.S. from the deal.)
After they get the money approved through legislation, the Democrats say they will target areas of research for alternative energy. Needless to say, the oil industry isn't on board. Mark Kibbe of the American Petroleum Industry says such a move will certainly cut oil production.
Rep. Nick Rahall (D-WV) chairs the House Natural Resources Committee. On "Street Signs" he said it's important to develop other sources of energy besides oil--and while there are no specific areas of alternative energy sources yet targeted for research--but that will be forthcoming from Democratic proposals.
But how does this play on Wall Street? With the Democrat's new energy plan to cut oil subsidies, now might be a good time to get into alternative energy stocks. So says Walter Nasdeo or Ardour Capital Investments. He was also on “Street Signs” to give his picks to Melissa Francis.
Nasdeo has his eye on 3 sectors: solar, wind and biofuels. While none of these have been performing particularly well, Nasdeo expects them all to take off assuming the tax bill is passed and more money becomes available to develop them.
Solar power could see a pop as silicon becomes more readily available, Nasdeo says. He expects silicon supply to increase in the next 12 to 18 months, which would boost the amount of capacity for solar companies such as Evergreen Solar and SunPower .
Wind is a different story, according to Nasdeo. It takes large amounts of energy to build and operate wind turbines, but once they are built, they can produce large quantities of power. Vestas Wind System and General Electric are two of the larger companies that deal in wind energy – but Nasdeo warns that it is difficult to invest on the equity side of wind. He says the sector is in more of a project-finance situation as of now, but will likely take off down the road.