Governments get into the Act, Too
Noted above is the fact that Total has operations in Russia, which can be just as big a risk as Africa. That country doesn’t have the same level of respect for the rights of foreigners as most other western nations. But it isn’t the only suspect country. Chevron Corporation (NYSE:CVX), for example, has been locked for years in a battle with Ecuador over claims of oil spill damage. Chevron has refuted that claim and won multiple court battles held outside Ecuador. That said, the case reads more like an international spy novel than an oil spill lawsuit.
Then there are countries like Venezuela and Argentina which simply take over operations because they say it is in the best interest of their countries. For an example of the damage that such things can cause, look at YPF SA (ADR) (NYSE:YPF), which was nationalized by Argentina. That stock once traded in the mid-$40 per share range, but now trades hands at less than half of that amount. Investors can’t look at that stock in the same away ever again.
A Risk to Watch
Oil and natural gas aren’t going away any time soon. There is too much demand for energy and too much existing infrastructure in place. Moreover, alternative energy sources aren’t yet viable enough to replace the energy we currently use. That means investors need to take some time to think about the many risks these international players face and how to react when bad things drag prices
The article Hard to Stomach Energy originally appeared on Fool.com and is written by Reuben Gregg Brewer.
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