Random Musings From The Energy Sector

Todd Shriber
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Just a few interesting headlines that have caught my attention in the energy sector over the past couple of days.

Reason For Optimism?

For fear of getting too excited, it is at the very a least a good sign that the Interior Department's Bureau of Ocean, Energy, Management, Enforcement and Regulation is getting around to approving deepwater drilling permits in the Gulf of Mexico. As we highlighted on OilSlick on Monday, Royal Dutch Shell, Europe's largest oil company, won the first approvals for new deepwater drilling projects in the Gulf since the Deepwater Horizon disaster last April.

I am not playing favorites here nor I do not have a position in Shell (RDS-A), but I am inclined to say the company deserved a solid from Uncle Sam after the moratorium on deepwater drilling put the kibosh on Shell's plans to commence a new project in Alaska later this year.

Rare Earths Rising

Well, the prices for the 17 elements that actually are not all that rare are rising. Fueled by soaring demand for iPhones, iPads, hybrid car batteries and other high-tech gadgets, Chinese rare earths exports crossed the $100,000 per ton mark for the first time last month. Last July, rare earths were commanding just over $14,000 per ton.

The apparent price rises have averaged $10,000 per tonne per month but accelerated in February, galloping ahead by $34,000 per tonne, according to Reuters calculations based on data from China's Customs office. One can only imagine what will happen to rare earths prices when China becomes a net importer of the metals in a few years. I suppose it can be argued that statistics like these bolster the investment thesis for a stock like Molycorp (MCP), the largest U.S.-based rare earths miner.

Legal Chicanery

It is doubtful anyone can say they are surprised that BP's lawyers would try some legal maneuvering in the face of all these spill-related lawsuits, but this move is pretty interesting. On Monday, Europe's second-largest oil company asked a Texas judge to dismiss lawsuits by institutional investors. BP (BP) claims these suits must be tried in British (Read: Presumably more favorable) courts. Lawyers for the investors say the claim lacks merit and they are not surprised by BP's tactics.

The Case For Coal

Environmentalists hate coal, but investors might do well to feel the opposite. Despite a small decline today, the Market Vectors Coal ETF (KOL) is up 3.2% in the past week and is currently bumping against some stiff resistance around $49. If that level is broken, the ETF could really takeoff, but this is not just a technical play.

It has been widely speculated that Japan, which already depends on coal for 25% of its power needs, will boost coal imports this year to make up for lost nuclear power. Japanese thermal coal imports are expected to rise 5% this year, Bloomberg News reported, citing Clarkson Research Services Ltd.

Charts Of The Day

They say a picture is worth a thousand words, so I will leave you with a couple of interesting charts. The first shows where Libyan oil exports go and the second illustrates deaths per energy source.

Libya Oil Chart

Energy Deaths Chart