It's Tuesday. Oil prices are plunging, and energy stocks are in turmoil, with shares of hydrogen fuel cell company Plug Power (NASDAQ:PLUG) down 3.5%, coal miner Peabody Energy (NYSE:BTU) falling 5.6%, and natural gas fuel supplier Clean Energy Fuels (NASDAQ:CLNE) faring worst of all -- down 8.7% as of 12:45 p.m. EDT.
What might these three companies have to do with one another?
At the first and most obvious level, Plug, Peabody, and Clean Energy are all energy stocks. None of them is an "oil stock," but that doesn't necessarily insulate them from shocks to the oil sector, inasmuch as hydrogen, coal, and natural gas (especially the renewable natural gas that is Clean Energy's specialty) can all be considered alternatives to oil.
With oil prices down more than 4% in Tuesday trading, that means that they're all trying to compete with energy derived from oil, which has just become 4% cheaper, a fact that makes them relatively less attractive today than yesterday. And Peabody and Clean Energy may have even more things to worry about today.
In the case of Peabody, it's a report from the U.S. Energy Information Administration that came out last week that may be making investors nervous. According to the EIA, a near-30% reduction in coal-fired electric power generating capacity over the past decade means that coal is now only the third-largest source of electricity in the United States, and has fallen behind both natural gas and nuclear power -- and is still declining.
Clean Energy has a different concern. As OilPrice.com reported last night, Russia is projecting a threefold increase in extracted and liquefied natural gas (LNG) production through 2035, and says it plans to ship LNG around the world, hoping to claim a 20% share of the international market.
Now, that doesn't necessarily mean bad news for Clean Energy, which only distributes natural gas as fuel for vehicles. It doesn't extract the natural gas from the ground, in competition with oil and gas companies. It doesn't liquefy the stuff and export it, in competition with Russian gas companies, either.
However, Clean Energy is spending money to invest in renewable natural gas (or RNG, essentially biogas generated from organic matter decomposing in landfills) as a fuel source. And greater competition from extracted natural gas from Russia could conceivably devalue Clean Energy's investments in RNG if it underprices the company's RNG offerings.
Worries over price competition, combined with the falling price of oil, could be the reason that Clean Energy stock is getting hurt even worse than the other energy stocks today.