Will BP's Gulf of Mexico oil spill have an impact on climate and energy policy? During today's OnPoint, Kevin Parker, global head of Deutsche Bank's Asset Management division, gives his take on how the recent oil spill off the Gulf Coast will affect the Senate's climate and energy discussions. He also explains how the spill will affect oil companies and the renewable energy industry.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Kevin Parker, Global Head of Deutsche Bank's Asset Management Division. Kevin, it's nice to see you again.
Kevin Parker: Good morning.
Monica Trauzzi: Kevin, questions are beginning to be raised about the impact of BP's recent oil spill in the Gulf on the climate and energy debate. Does the oil industry still have a seat at the table at this point in the discussion and does the event at all change the Senate's debate over climate and energy?
Kevin Parker: Well, I think the oil industry certainly has a seat at the table, deserves a seat at the table. It is the foundation for the global economy in terms of energy, so they cannot not be at the table. However, I think the environmentalists get a seat at the table, which perhaps before, although they were present, their voices are probably going to be much more widely felt. Will it change the debate in Washington? I certainly hope so. You know, our line at Deutsche Asset Management has been what's not to get about a clean energy future and I think this is one great example, certainly along environmental lines, that the dependence on fossil fuels carries with it risks and costs that most people don't factor into the price.
Monica Trauzzi: So, an event like this could potentially make a renewable electricity standard more palatable to certain lawmakers?
Kevin Parker: Well, one would hope so. It certainly brings into the debate, in a much more stark way, the benefit of a clean energy future.
Monica Trauzzi: How is Wall Street digesting all of this?
Kevin Parker: Well, the markets are tumbling today and probably a lot of that is around Greece, but certainly I remember in the last big oil spill in I think it was '89, the markets reacted very negatively as well. Certainly the economic fallout from something like this can be dramatic.
Monica Trauzzi: Can Democrats use this event to shape a new message to sell this type of policy to the American people?
Kevin Parker: I don't know that shaping a new message is necessary, but certainly sharpening the message around the benefits of clean energy and also the downside risks of fossil fuels, because I think we've come to take for granted that spewing carbon into the environment is costless and, clearly, that's not the case.
Monica Trauzzi: President Obama's new offshore drilling policy was controversial when it was first introduced. Would you expect to see changes to that at all?
Kevin Parker: You know, I think the push for offshore drilling is going to continue. I think whether we like it or not we are dependent on foreign oil supplies. The rate of investment in this country to move off of fossil fuels has been lagging some of the other economies and countries around the world and with the lack of a clear message out of Washington I think our dependence on fossil fuels, either imported or drilled offshore, is only going. And I think environmental disasters like this are probably going to be more prevalent in the future.
Monica Trauzzi: Many oil companies recently have been making some big investments in renewables and alternative forms of energy. How do you think this event shapes the investments that oil companies are making?
Kevin Parker: Well, I think the oil companies see it. The 850 signatories to the SEC letters see it, the asset owners around the world see it, 121 governments around the world see it. Climate change is a big risk and a big opportunity for those that are in and in early. And I think the U.S., in its inability to get in front on this issue, is abdicating its leadership to other countries around the world and going to find itself in a very difficult economic position in what many, including us, are calling the Industrial Revolution of the 21st century.
Monica Trauzzi: More broadly, on the Senate negotiations, are they at a standstill at this point? I mean have Senator Graham's actions essentially sealed the fate of the negotiations for this year?
Kevin Parker: I don't think so. I think that we still have a couple of other options. Obama has been cagey about exactly how he's going to weigh into this debate. He continues to point to the EPA as being the hammer. What the EPA is going to do now, in terms of the oil spill and as it revolves around carbon in the whole climate change debate, is another question mark. So, I don't think the advocates for a climate bill are out of bullets yet.
Monica Trauzzi: Given the roller coaster ride the markets have been on where does the investment outlook stand at this point for renewables?
Kevin Parker: Excellent. The markets have re-opened to capital raising. I think the trends that people see in other parts of the world around the concern over climate change is giving buoyancy to new issues of renewable companies and one needs to look no further than the Energy Efficiency Index, which has outperformed virtually every other index over the last three years. If you had your money in energy efficiency stocks you've done very well despite the credit crisis.
Monica Trauzzi: All right, we're going to end it there. Thank you for coming on the show again.
Kevin Parker: Thank you, nice to see you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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