Zacks Analyst Blog Highlights: Wal-Mart, Chevron, Marathon Oil, Apache Energy and Chesapeake
CHICAGO, April 13, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Wal-Mart (NYSE: WMT), Chevron (NYSE: CVX), Marathon Oil (NYSE: MRO), Apache Energy (NYSE: APA) and Chesapeake (NYSE: CHK).
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Here are highlights from Tuesday's Analyst Blog:
Trade Deficit Down Slightly
The 2010 trade deficit totaled $497.82 billion, which is 64% of what all the firms in the S&P 500 earned, worldwide, in 2010.
Oil Addiction vs. Wal-Mart
The goods deficit has two major parts, that which is due to our oil addiction and that which is due to all the stuff that line the shelves of Wal-Mart (NYSE: WMT). Of the total goods deficit of $59.34 billion, $25.82 billion, or 43.5% is due to our oil addition.
Relative to the overall trade deficit, our oil addiction is 56.4% of the problem. For all of 2010, we ran a $265.12 billion deficit just from petroleum. That is equivalent to the combined market capitalizations of Chevron (NYSE: CVX), Marathon Oil (NYSE: MRO) and Apache Energy (NYSE: APA).
The monthly deterioration in the goods deficit came mostly from the non-oil side. That is a very bad sign for coming months, as oil prices really shot up during March. The oil deficit was actually down up by $1.1 billion or 4.1%. Relative to a year ago, the oil deficit was up 9.2% or $2.17 billion. On the non-oil side, the deficit rose to $32.70 billion from $32.32 billion in January, and 21.0% above the $27.02 billion level of a year ago.
Oil Reduction Key to Improvement
The oil side should be the low-hanging fruit to bring down the overall trade deficit and thus help spur economic growth. Oil is primarily (70%) used as a transportation fuel. The technology exists and is widely used abroad to use natural gas (NG) to power cars and trucks. There are over 12 million NG vehicles on the road worldwide, but only 1.2% of those are in the U.S. Thanks to the emerging shale plays, we have ample domestic supplies of natural gas, and on a per BTU basis, natural gas is selling for the equivalent of oil at $24.60 per barrel.
We need to get past the "chicken and the egg" problem of nobody wanting to buy a natural gas-powered vehicle because there are no convenient places to refuel, and gas stations' reluctance to install refueling stations for NG powered vehicles since there are not many of them on the road. Not only would such a move save money for drivers in the long run (there is an upfront capital cost as natural gas-powered engines are more expensive than regular gasoline powered engines), but it would substantially reduce our trade deficit.
Since it is a domestically produced fuel (and most of what we do import, we import from Canada) there is also a huge national security argument for moving to using more NG. The dollars we send abroad to pay for oil imports are simply the tip of the iceberg when it comes to the overall cost of oil. A substantial portion of the Pentagon budget is devoted to keeping the oil flowing in the Middle East and the sea routes open.
NG is also a much cleaner fuel and emits far less CO2 than does gasoline (and almost no other pollutants other than CO2). Thus it would be a very useful step towards stopping global warming. Doing this -- especially breaking the chicken and the egg problem -- will take federal government leadership. The benefits for the economy however, would be huge.
It seems inevitable to me that it will eventually happen, and when it does, it will be a great boon to major natural gas producers like Chesapeake (NYSE: CHK). The timing of it happening is very uncertain, but the sooner it happens, the better.
I don't want to minimize the cost of doing so, particularly in terms of water quality. We need to do more research on the chemicals used in fracking operations to get at the shale gas (starting with getting rid of the trade secrets provision that allows the firms to hide exactly what they are putting into the ground and potentially the groundwater). Strong environmental regulation is needed of the shale gas operations, but it should be possible to both protect the environment and get the gas out of the ground.
Yes there would still be an environmental risk, but we need to take some risks, and the risk of not using the natural gas resource seems greater. It strikes me as a trade-off worth making.
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