Dallas, Texas 12/12/2013 (FINANCIALSTRENDS) – Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) has been in a tough position on several fronts, in the past quarters. While analysts have dropped the fund, some investment advisors do not have much to say about this fund. The most recent shocker came in Mid-November, when Tudor Investments’ headed by Paul Tudor Jones’ unceremoniously dropped XLE and co from its portfolio, even as it quick marched towards acquiring XLY.
However, industry experts presume these moves could also be hedge-moves and need not be of practical importance to investors.In the meanwhile, energy sector in the U.S. is poised for some critical commentary.
Does the Ehtanol rush mean eco-imbalance
With nearly every energy sector company dependent on the government’s push to produce ethanol, the thin eco-balance is apparently under pressure. Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) and other energy stock investors are seen to move quickly and invest long term in some of the major funds, the ground reality at grass-root level is indeed disturbing.
Called the Era of Ethanol push, a recent analysis by AP has established that the blind rush to extract ethanol has led to over-exploitation of both farming land and forest areas to plant corn. Apparently, even conservation land was not spared and destroyed in a bid to plant more corn by farmers.
The result was a lop-sided habitat, water pollution, besides nearly 5 million acres of land set aside for conservation being utilized for the mad Ethanol rush.
AS the government stressed the need to increase the overall production of ethanol, the prices of corn have driven up, leading to further increase in corn farming.
Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) too has benefitted as has the overall energy industry. Major stocks which saw prices soar included VLO, ADM, and REGI
In 2006, the overall corn crops were in the range of 22%, however by 2012, corn production has doubled, with even marginal farms beginning to grow corn.
US largest oil supplier
Of increasing importance in the energy industry is the growth of United States as the world’s largest oil producer, surpassing Saudi Arabia. Publishing this position was energy analysis firm called PIRA. The past four years have seen the highest growth in fuel output in the country, reports the firm. Additionally, the firm confirms that the production in US far exceeds that of the total production of the nine other countries after the US.
However, the analysis also confirms that there is no energy security, though the country produces highest quantity of oil.
Roubini Global Economics report
Another report by Roubini Global economics has pointed out that though U.S. may grow to be the highest energy producer in the country, the country lags 13th on the energy security factor.
The fact of the oil production and consumption in the US indicates that it is lop-sided.
U.S has very high domestic oil production. However, the levels of oil the domestic consumers use is much higher that of Saudi Arabia itself. Therefore, this will mean US will be dependent on oil supplies, if it is unable to produce to sufficiency levels. Hence, this will disrupt the energy security for the country, resulting higher price movement for the oils.
Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) has grown in the same proportion as the US oil and energy industry. Other biofuels and ethanol based companies too have shown remarkable resilience in the era of Ethanol!