I'm wondering how various politically based actions might impact stock prices.
There is a lot of news about windfall taxes already put in place and about proposed windfall taxes (US and elsewhere). Such taxes/actions may or may not happen or amount to anything substantial - many such things have associated mitigations and loopholes that allow for the good political PR without actually impacting much.
So maybe there are non-existent and/or toothless windfall taxes or similar that don't ultimately reduce profitability and thus in theory don't negatively impact stock performance. Or maybe the taxes don't reduce profitability but the sheer weight of negative PR against the FF industry nonetheless suppresses investor interest/confidence and consequently share prices. Or maybe the price of gas, diesel, electrical power, and heating fuels all but causes riots and thereby forces politicians to either vote for huge profit-robbing windfall taxes or pack their bags.
In the other direction, it seems plausible that gov'ts might instead choose to simply subsidize the high FF prices in order to keep prices accessible for gas, diesel, ele, and home heating. In which case the profits stay high, the demands break records, and presumably the share prices and stock performances become the stuff of legend.
Wondering what scenarios seem plausible/likely/unlikely... and of course how we might see them coming.
Influence of politics on stock performance - eg windfall tax
Re: Influence of politics on stock performance - eg windfall
I think time is a factor in some political gimmick like a windfall tax.
Short term politicians will pat themselves on the back for soaking the evil fossil energy companies. Fossil stock prices will fall with the apparent bad news. Companies will certainly not rush to do more exploration, drilling, completions or anything else. In fact it seems to me they may do the opposite. What good is great FCF if you can't use it for increased production and rewarding shareholders? For me personally, I think I'd keep it in the bank and just do enough to maintain current production. Maybe even cut production to protect my valuable in ground assets.
Long term, production doesn't rise, in fact maybe it falls. Energy prices rise, and profits rise. But no additional barrels are produced. Then the politicians get out their ugly stick again looking for someone to blame. Too bad there aren't any mirrors in DC!
Kevin
Short term politicians will pat themselves on the back for soaking the evil fossil energy companies. Fossil stock prices will fall with the apparent bad news. Companies will certainly not rush to do more exploration, drilling, completions or anything else. In fact it seems to me they may do the opposite. What good is great FCF if you can't use it for increased production and rewarding shareholders? For me personally, I think I'd keep it in the bank and just do enough to maintain current production. Maybe even cut production to protect my valuable in ground assets.
Long term, production doesn't rise, in fact maybe it falls. Energy prices rise, and profits rise. But no additional barrels are produced. Then the politicians get out their ugly stick again looking for someone to blame. Too bad there aren't any mirrors in DC!
Kevin