Moody’s has been explaining why it downgraded Tepco’s credit rating in the wake of the Fukushima crisis. It’s hardly a decision that needs much justification: the problems have been as visible and arguably as damaging to the company’s reputation as the Gulf of Mexico spill was to BP.
But Moody’s report makes some interesting points: the first being that its analysts think there is a high likelihood of the Japanese government stepping in to prop up the company. This actually gives the company a higher long-term rating than its stand-alone credit profile (SACP), which is now a junk-rated BB+.
As the oil price continues to soar, taking it to record sterling highs, governments are starting to fret.
In the UK, the chancellor was last month pushed to offer a 1p cut in fuel duty to offset the impact of higher oil prices. The opposition claimed on Tuesday the cut has already been erased by the rise in oil since then, and it is no coincidence that on the same day, the energy secretary Chris Huhne met the Saudis to talk about what can be done on the supply side.
In the US meanwhile, Barack Obama has talked about weaning the country off its oil imports to improve energy security.
Marathon Oil, the US’ fourth biggest integrated oil and gas company, is lost under the radar. And they really should not be.
David Pursell, head of Macro Research at Tudor Pickering Holt, the energy investment and merchant banking firm, notes:
They’re certainly in the right zip codes.
Indeed, they have everything from unconventional shale gas to global oil in their portfolio. And a very strong refining, marketing and pipeline business.
Analysts are currently rushing out their forecasts for 2011, and one thing that almost everyone seems agreed on is this: oil prices will remain high.
Last week, Barclays predicted that oil would hit $100/barrel at points during the next year. Today, Moody’s has made a slightly lower prediction, saying that it expected prices to average around $80/barrel over the year. (It is worth pointing out that these two are not mutually exclusive).
As ever, the driving factor is Chiinese demand:
Oil finally moved sharply higher late in the year, thanks to continued strength in Asia (particularly China), a weaker US dollar and an improving outlook for western economies…
We expect these fundamental and technical dynamics to continue in 2011, keeping oil prices strong.
When Germany announced its plan to phase out nuclear power stations last month, shares in the big four German power companies rose. The agreement made with the German government would see Eon, RWE, EnBW and Vattenfall pay a nuclear-fuel rods tax of €2.3bn until 2016 – but the market had been expecting worse.
But today Moody’s has warned that the impact of the tax might yet force a downgrade of the companies’ credit ratings.