The recent tragedies that have struck the energy sector obviously result in lost production and profits from a corporate standpoint. Massey Energy has said it will be able to replace some, but not all of the lost production at the Upper Big Branch Mine in West Virginia. From an investor's perspective, that is not good news at a time when metallurgical coal prices are soaring. Analysts have already said the door is open for Massey (MEE) rivals to take market share.
The explosion and subsequent sinking of the Deepwater Horizon rig in the Gulf of Mexico will result in tens of millions of dollars in lost lease income for Transocean (RIG), the rig's operator. Not to mention the fact that the well is hemorrhaging about 1,000 barrels a day of crude. That is lost oil that BP (BP) was paying a lot of money to get its hands on.
More importantly, lives have been lost as a result of both of these accidents. The explosion at the Upper Big Branch mine is the worst mishap at a U.S. coal mine since 1970. Twenty-nine Massey staffers perished as a result. Eleven Horizon workers are presumed dead and another four are critically injured. The bottom line is these deaths represent 40 too many. It may sound idealistic, and while it must be acknowledged that working in a coal mine or on an oil rig is not the safest way to earn a living, but this is the U.S. The 21st century U.S. and no one should die in an effort to provide for his or her family.
These tragedies may serve to motivate the green energy crowd and renew their battle cry for seeking more avenues of alternative energy, i.e. wind, solar, etc. That is fine and to be expected. A vigorous, productive debate regarding U.S. energy policy that results in the creation of more U.S. jobs in both the alternative and traditional energy sectors is long overdue. The issue may prove to be how ready the alternative energy crowd is to seize the moment and how willing Americans are to invest in items like electric or hybrid cars.
Cost is always the deciding factor. Say you consider yourself pro-environment, but you know that you want a sports car. A Tesla Roadster, of which only 1,000 were produced in 2009, looks sporty for sure, but the price tag is over $100,000 AFTER the tax credit you get for buying an electric car. Then you have to contend with finding somewhere to charge the battery. On the other hand, you could buy a BMW 5 series for less than $50,000 and get about 25 miles per gallon in a car that seats five and still has sports car-esque horsepower.
A more realistic example involves the ubiquitous Toyota Prius. On Toyota's Web site, the price of a new Prius V is listed as $28,070. Factor in tax, title, registration and all that good stuff and you will be paying in the neighborhood of $34,000 to get your 51 mpg. The Honda Civic DX, powered by regular unleaded, gets 36MPG on the highway and the listed price on Honda's Web site is about $15,600.
There are other issues regarding alternative energy as well. For one, it may not be as clean as we are led to believe. Plans for a wind farm off the coast of Massachusetts have encountered opposition from local fisherman because the project could disturb their livelihood. Andrew Kleit, a professor at Penn State, says that not a single off-shore wind farm has been built in the U.S. Kleit also astutely points out that while solar power on its own is clean, the materials used to make solar panels and generators must be mined from the earth and that mining is done in less than green ways.
At the end of the day, alternative energy comes with its own costs, monetary and otherwise, and the willingness to incur those costs probably does not exist on a sufficient basis to send coal and oil to the sidelines.