Tags: Katrina | Invigorates | Energy | Sector

Katrina Invigorates Energy Sector

Wednesday, 07 September 2005 12:00 AM

1. States Fight Swollen Gas Prices

Or at least slightly better.

In the aftermath of Katrina, more and more states are opting to suspend backbreaking gas taxes. And subsequently, the price of gas is easing somewhat for American consumers.

As CNN recently reported, drivers in Georgia are already seeing lower pump prices since the state suspended taxes on gasoline last week. And other states may follow, the news network reports.

After peaking at $3.06 Monday - after Hurricane Katrina caused shortages - on Tuesday the average price for a gallon of regular unleaded gasoline dipped by a little more than a penny to $3.04, up from $1.85 a year ago, according to the American Automobile Association (AAA).

Georgia's Gov. Sonny Perdue said the tax break in his state could cut the cost of gas by about 15 cents a gallon. The one-month break is predicted to cost the state $75 million.

State lawmakers in other states - including Oklahoma, Massachusetts, Connecticut and Pennsylvania - have either proposed or are considering similar measures.

All 50 states apply a flat-rate tax on each gallon of gas sold - an average of 21.8 cents per gallon - according to the American Petroleum Institute.

That's in addition to state sales taxes - which are usually between 2 and 6% - plus a federal tax of 18.4 cents per gallon.

New York leads the nation with the highest state gasoline taxes, while Alaska has the lowest, according to the American Petroleum Institute.

On top of New York's state tax of 8 cents per gallon, it charges 8% state sales tax and a Petroleum Business Tax of 15.2 cents per gallon. There is also a spill tax of 0.3 cents per gallon and a petroleum-testing fee of 0.05 cent per gallon levied on gasoline.

Investors have been out kicking the tires on alternative-energy vehicles for years now. But cash customers have been few and far between.

After all, solar energy and wind power may look good in a brochure, but that appeal hasn't translated into much when it comes to the bottom line.

But now, with Katrina leaving higher gas and oil prices in her wake, all that could be changing.

CBS Marketwatch is reporting that a clean-energy exchange-traded fund (ETF) - one that tracks the alternative energy sector - is in full rally mode these days. This is an industry that NewsMax's SectorTrade service has been tracking closely in recent weeks.

For the week ended Sept. 2, the PowerShares WilderHill Clean Energy Index was up 8.1% - or about 6.8 percentage points higher than the S&P 500 Index over the same period, according to investment research firm Morningstar Inc.

Fund managers say that while the economic fallout from Katrina has certainly fueled interest in the fund, higher gas prices prior to the devastating hurricane had already gotten the ball rolling.

"Inflows started the week before Katrina, as oil prices moved higher," said Robert Wilder, head of California-based fund WilderShares LLC.

The fund, which has about $105 million in assets, had been gathering about $10 million a month. But last week, after Katrina ravaged large areas of coastal Louisiana and Mississippi, the fund saw $35 million come through the door, says Wilder. And in the week prior to the hurricane, WilderShares took in $20 million.

"Money started moving in the week before Katrina - a lot of that was due to spiking oil prices in anticipation of the damage," Wilder said.

Analysts told CBS Marketwatch that the upswing in performance and trading isn't surprising after a natural disaster like Katrina, which has put a chokehold on a central source of the nation's oil.

"It's a good hunch there are some parallels," said Andrew Brengle, senior research analyst at KLD Research & Analytics Inc., a firm specializing in socially responsible investing.

"We're feeling the pinch of higher oil prices, and alternative energy is looking more attractive," he added.

Crude oil prices did move lower recently, as several countries moved to tap strategic reserves. Meanwhile, oil centers in the Gulf of Mexico showed some signs of initial recovery.

American stocks moved higher as a result, and the WilderHill Clean Energy Index ETF jumped 1.3% to $17.54 on volume of about 406,000 shares on Tuesday.

At the same time, financial stocks rose, with the insurance sector showing strength in the wake of expected rate hikes to pay for damage resulting from Hurricane Katrina.
 
A drop in oil prices and a $3 billion-plus acquisition in the sector also added to the bullish mood.

The S&P Insurance Index rose 1.2%, the Philadelphia Banking Index added 1% and the AMEX Securities Broker Dealer Index added 1.5% at the close of trade.
 
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3. Corporate America to the Rescue

Big business gets a bad rap on the editorial pages of The New York Times and on the set of leftie news talk shows like NBC's Today.

You've heard all about how the large corporations are heartless and cold - bent on separating orphans from their gruel. But that sentiment rarely holds up, especially in times of national crisis.

Take Hurricane Katrina.

Employers across the country are donating millions to hurricane relief efforts on the Gulf Coast, and they're matching the charitable contributions made by their employees.

Wal-Mart, the world's largest retailer (and one of the mainstream media's favorite corporate whipping boys), is among the largest corporate donors to the relief effort.

The company has contributed $17 million in cash donations and $3 million in merchandise. Additionally, the Walton Family Foundation has given $15 million to nonprofit agencies for assistance to Katrina victims.

Health insurer UnitedHealth Group contributed $10 million to the hurricane relief effort.

It is offering a 24-hour toll-free crisis hotline (866-615-8700) to aid anyone who is affected by Hurricane Katrina, regardless of their health care provider. UnitedHealth and Aetna have lifted their medical and pharmacy policy requirements to help ensure access to treatment and medications.

In addition, the Anheuser-Busch Foundation has donated $1 million in cash and two million cans of water to the American Red Cross, while ExxonMobil has committed $7 million to relief efforts.

And employers are bolstering the donations made by their workers. The financial services company MassMutual Financial Group will contribute $2 for every dollar that employees give to the American Red Cross and the Salvation Army. Likewise, payroll services provider ADP is matching 150% of its employees' charitable contributions.

4. A Better Way to Profit from Today's Hot Sectors

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ETFs are like mutual finds. They invest in an entire basket of securities in a single industry, but unlike traditional mutual funds, you can trade ETFs intraday, sell them short or simply hold them while riding out powerful trends.

Our

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For example, we invested in the energy sector when oil was just $29.41 a barrel and since then we have realized gains of as much as 52%. 

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In the past year alone, we've bagged some tidy profits in the other big sectors, including:

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1. States Fight Swollen Gas Prices Or at least slightly better.In the aftermath of Katrina, more and more states are opting to suspend backbreaking gas taxes. And subsequently, the price of gas is easing somewhat for American consumers.As CNN recently reported, drivers in...
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Wednesday, 07 September 2005 12:00 AM
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