No. of Recommendations: 4
I'm old enough to remember the days when a high percentage of folks smoked cigarettes. We recently took a trip to Eastern Europe (Balkan countries) and tobacco consumption is prominent there, with cigarettes and non-combustible products with the young people. I have small holdings in PM, BTI and MO. I continue to contemplate buying more stock in these companies.
With Vermont and now California beginning the legal process of suing the largest oil companies for environmental damage compensation, could we be seeing the opening gambit for a similar future settlement process akin to what the states did with the tobacco companies? We know how that worked out. The tobacco companies went on to do quite well and so did the states. This is to not get into what the tobacco monies were spent on within the states, rather it is to crowd source on this board what could be the case for the energy companies and their shareholders.
Tobacco from its earliest days has been a revenue boon for federal, state and local governments. We can similarly say petroleum products have likewise been a revenue source for federal and state governments. Supposing there is a multi-state or perhaps all states legal consortium that backs the oil companies into a corner where the only way out is a negotiated multi-year payout to the states, would it take the same form as the tobacco settlement where the costs are passed on to the consumers in the form of higher product costs? Higher product costs would lead to less consumption, the same consequence as was seen for tobacco products. What would this mean for shareholders in these energy companies? Could we expect to see these companies prosper over the long term despite lower consumption? Additionally, would this lead to protections from overseas supply as the government(s) police entry to ensure stiff taxes are being collected on incoming supplies? The protection from competition given to tobacco companies because of the way the settlement was carried out was proven to be a powerful barrier to competition. Could we see something similar with the petroleum energy companies?
Like many of you, I have holdings in energy companies. Our holdings are Marathon Petroleum (refining), Occidental, Canadian National Resources and Suncor. We cannot live in a world without petroleum resources. I take that as a given and it is a major reason why I invested in these companies when they were cheap. What I am trying to get my head around is how the consequences of state governments taking these companies to court will eventually be for these companies, their customers and their shareholders.
What do you think? Will this be a replay of the tobacco settlement?
Uwharrie
