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Dark day for black stuff as Obama backs renewables

February 28, 2009

Market report

It was a slender summary slipped out by the White House as part of its Budget plan – but to oil industry-watchers, it signalled the end of America’s love affair with the black stuff.

President Obama’s plan is to scrap $31.5 billion (£22 billion) of oil and gas industry tax breaks over the next ten years and channel investment into renewables. The change of direction includes a new tax from 2011 on offshore oil and gas production in the Gulf, where both Shell and BP have oil rigs, as well as higher fees for unused leases and for drilling permits.

Shell fell 39p to £14.84 yesterday and BP slid 11p to 448¼p. Moreover, TNK-BP, BP’s Russian subsidiary, revealed that, under US Securities and Exchange Commission accounting rules, its oil reserves had shrunk for the first time in six years, with a reserve replacement ratio of 84 per cent, compared with an average of 133 per cent over the past five years. BP blamed this on the sudden dive in the oil price. As earnings fall, the assumption that the oil producers’ dividends are safe is being questioned.

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