Monday July 23, 8:46 am Eastern Time
BusinessWeek Online
STREET WISE -- Time to Plug Into Energy Stocks?
biz.yahoo.com
By Heesun Wee
Fund manager Catherine Zaharis of Invista Capital Management sums up energy companies' recent stock activity in a few breaths: ``Tumble, tumble, tumble.'' Only a few months ago, energy prices and stocks were soaring. Drivers were paying near $2 a gallon at the pump -- almost double what prices had been a year earlier. Natural-gas was at an all-time high of $10 per 1,000 cubic feet. In California, energy companies were fetching several thousand dollars for one megawatt of electric power, as opposed to under $100 now. Utility IPOs were red-hot.
But energy and stock prices have been heading south almost as fast as they climbed. Natural-gas prices recently plummeted to around $3 per 1,000 cubic feet. Nationwide, retail gasoline prices are averaging around $1.50 a gallon. Add to that an ironic twist: Unseasonably cool weather has turned California's power dearth into a glut -- so much so that excess power being sold at a loss.
Is the energy crisis over? Hardly, energy analysts and economists say. They argue the current dip in energy prices doesn't signal a fundamental long-term shift in the supply-demand equation. ``What we've done is temporarily solve the situation via softer demand,'' says Dan Pickering, an oil-service group analyst at Simmons & Company International.
The current trend can be blamed largely on the relatively cool June weather and a troubled economy, which has restrained demand for power, especially in the industrial sector. Nearly one-third of natural-gas demand is driven by industrial users. ``On the supply side, there has been no material improvement....Volatility and higher-than-expected prices for natural gas and electricity are here to stay until adequate new supplies are installed and produced,'' says Christopher Ellinghaus, a power and natural-gas analyst at Williams Capital Group. |
