10 Energy Plays with Long-Term Potential

Brittney Barrett  |

There has been considerable speculation on the price of energy; whether it will go up or down and if this month’s reputation for sell-offs makes it prime time to shed energy stocks. In the short term that is anyone’s best guess. Banks, from Goldman Sachs (NYSE: GS) to Morgan Stanley (NYSE: MS) have suggested profit-taking as prices slip for a day or  a week alongside short-term external factors.

Conversely, there have been myriad arguments in the other directions, with news organizations and some analysts fearing that energy prices will not only maintain themselves but exceed current levels.  fear that energy prices will maintain and exceed current levels. The current energy plan intends to push the amount of U.S. imported oil down by a third, but in terms of overall consumption, our efforts will be largely canceled out by the growing middle classes in China and India.

Both nations, despite efforts like our own to implement more alternative energy, will drastically increase the amount of oil and gas required to run their nations on a daily basis. Considering this, alongside domestic gas gluttony and it seems like short-term fluctuation will lead to long-term high prices. Despite being the season of selling, holding onto oil and gas stocks through the summer may be a good idea considering, even if there are fluctuations short-term, rising global demand has the potential to keep them high for the long-term.

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While our wallets will be thinner, the pockets of myriad companies in energy and related industries will benefit from increase in expenditures. That includes corporations like Exxon Mobil (NYSE: XON) and Chesapeake Energy (NYSE: CHK) who will presumably reap the benefits if oil continues its ascent. Among the most interesting part about Exxon’s earnings this past quarter; however, was how much of their success was reliant on natural gas.

Exxon and Chesapeake are two of the primary natural gas producers and more and more people are finding unique ways to use natural gas. Compared with oil it’s inexpensive and cleaner, meaning that if it’s possible to use it as an alternative, people will. Clean Energy (NASDAQ: CLNE) is currently planning to execute a mass-transit and truck system that would be reliant on natural gas. Additionally, current demands on natural gas, both industrially and at home, will continue to grow with the economies in the developing world.

The same goes for coal. Coal is used in the construction of electric plants, which are being built at an unparalleled rate in the developing world. The more of these plants that are built, the greater the demand for coal and the higher its price. In China alone, demand for electricity is expected to increase by 12 percent this summer. The pressure will likely boost shares of companies like Peabody Energy (NYSE BTU), Arch Coal (NYSE: ACI) and Massey Energy Company (NYSE: MEE).

With paralyzing prices at the pump and astronomical utility bills, it’s difficult to imagine that prices could still go up, but population increases and a burgeoning middle class internationally, rising prices are a reality. Chinese people are buying cars at rate that while good for the auto industry and shares of companies like Ford (NYSE: F) and GM (NYSE: GM), it has the potential to shoot oil prices through the roof. Being able to afford a tank of gas later may mean investing in energy now.

That goes both for mega companies that operate internationally, like those mentioned above as well as the smaller corporations concentrated on domestic oil acquisition. The latter group includes companies like Whiting Petroleum Corporation (NYSE: WLL) and Northern Oil and Gas Inc. (AMEX: NOG)


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