From an investor's perspective, news that a New Orleans federal judge has lifted the government-imposed six-month moratorium on drilling at depths greater than 500 feet should have been more warmly received. The Oil Services HOLDRs ETF (OIH), home to stocks that are intimately impacted by the drilling ban such as Tranocean (RIG) and Halliburton (HAL), slid more than 3%. Hornbeck Offshore (HOS), the company that brought the suit against Uncle Sam, had a wild day, gaining as much as 11% at one point only to finish the day in the red.
The closing results for exploration and production companies and oil services stocks are probably a result of negative sentiment in the broader market because if you are bullish on oil-related equities and want to see the U.S. economy continue to recover, it is hard to deny that lifting the drilling ban is a step in the right direction. No, Tuesday's decision from Judge Martin Feldman did not represent an opportunity to pop open some champagne because the feds have vowed to appeal the decision. No surprise there because they need to provide cover to the White House for what may ultimately prove to be a foolhardy decision.
Not being a lawyer, I am not exactly where the case goes from here, but I assume the next stop is an appeals court and if Feldman's decision is not upheld there, the oil companies and Uncle Sam could battle over the moratorium all the way to the U.S. Supreme Court. That is not an appealing scenario to any oil firm given the current makeup of the nation's highest court.
Fears that the moratorium could last longer than six months are swirling and by some estimates if the drilling ban drags out 18 months, the already economically battered Gulf Coast region could hemorrhage another 20,000 jobs. The moratorium may highlight how out of the touch with the economy the White House really is. Job growth remains anemic and the recent batch of economic data reports has increased fears that the U.S. may be in for a pesky ''double-dip'' recession.
On more than one occasion, I have noted that 2010 is an election year and it is already evident the party that holds the majority in both houses of Congress is destined to hold slimmer majorities after November. The folks that run the show at the White House might want to acknowledge that punishing the energy industry, one of the top creators of private sectors jobs in the U.S., could be quite toxic to their time at 1600 Pennsylvania Ave.
It really is all about the economy and 2012 will be hear before we know it. Of the five presidents that preceded President Obama, one from each party failed to win reelection and the common thread between the two was that both had to run in the face of a dour economy. Implementing a moratorium on drilling that stifles job creation and needlessly sends more American workers to the unemployment line may have President Obama looking for new work as well come January 2013.