TSX Canada: Are Energy Stocks Rebounding?

Before buying stock in renewable energy on the TSX, research the risk that big oil players like Enbridge (TSX:ENB)(NYSE:ENB) will take home.

| More on:

TSX Canada energy stocks took a hit when Saudi Arabia refused to reduce oil output at the beginning of the COVID-19 pandemic. Consequently, North American oil and gas companies suffered substantial reductions in stock market valuations.

Oil stocks like Enbridge (TSX:ENB)(NYSE:ENB) already struggle to compete with low oil prices. Now, these firms face possible bankruptcy.

Geopolitical conflicts are not the only reason why you might want to rethink your Canadian energy investments. Renewable energy is quickly replacing oil and natural gas.

Soon, due to global solar and wind energy projects, the oil industry will require further supply contractions or low prices. Neither outcomes are optimal scenarios for shareholder returns

Is Enbridge spending too much on traditional oil projects?

The energy industry must be projecting some level of oil and natural gas demand in the next 10-30 years — hence, the reason Enbridge is still investing outrageous amounts of money to maintain expensive oil pipelines. Given the current oil price (which may be the normal market value in 15 years), Enbridge is probably overspending on traditional energy projects.

First of all, Enbridge closed a section of the LaSalle Pipeline for a one-week-long servicing under the St. Clair River. Notably, Enbridge chose a less-optimal time to begin a $20 million project to replace a portion of the submerged pipeline. Pipeline maintenance doesn’t seem to be a high priority when many suppliers are willing to pay people to take the product out of their storage units.

Second, according to The Observer, the oil firm’s agreement with the former U.S. governor of Michigan obligates the company to build a $500 million tunnel crossing over the Straits of Mackinac. That’s a $520 million investment in a commodity which began historically trading at negative values last week!

Public sentiment toward oil stocks appears weak

The public is not happy with oil and gas companies. In fact, everyone wants either dirt-cheap prices or a switch to renewable energy. In the age of coronavirus, Canadian and U.S. citizens are calling for an end to the work on pipelines:

Does this active work yard of matting to bulldoze through the wetlands for Enbridge’s Line 3 pipeline look essential to you, @GovTimWalz? Water is essential. Health is essential. Expanding the tar sands is not. Respect indigenous territory. #StopLine3 #EarthDay2020

— giniw collective (@GiniwCollective) April 22, 2020

Energy projects appear even less vital when the majority of the populace can’t even use their automobiles. More importantly, the negative public sentiment may signal a subdued rebound to TSX Canada oil stocks, even if the price of oil jumps back above the cost of production.

Should you invest in the TSX Canada energy sector?

Those in power are more likely to stay in power. Oil companies are already profiting from renewable energy. The bottom line: research your options thoroughly before buying renewable energy stocks with your retirement savings. Some of these companies may suffer bad public relations in the near future.

You do not need to avoid investing in all energy stocks completely just because big oil companies have an edge in obtaining renewable contracts. If the values of Enbridge and other TSX Canada energy stocks don’t align with your personal mission, find companies with records that you can trust.

Likewise, research the company leadership if you decide to buy energy stocks for your retirement portfolio. In this way, you can avoid feeding the same people fighting to gouge you at the pump today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Debra Ray has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.

More on Energy Stocks

man touches brain to show a good idea
Energy Stocks

1 No-Brainer Energy Stock to Buy With $500 Right Now

Should you buy a cyclical energy stock at its decade-high? Probably not. But read this before you make a decision.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Top Canadian Renewable Energy Stocks to Buy Now

Here are two top renewable energy stocks long-term investors can put in their portfolios and forget about for a decade…

Read more »

oil and gas pipeline
Energy Stocks

Where Will Enbridge Stock Be in 3 Years?

After 29 straight years of increasing its dividend and a current yield of 6%, here's why Enbridge is one of…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold for 2025?

Enbridge stock just hit a multi-year high.

Read more »

oil pump jack under night sky
Energy Stocks

Where Will CNQ Stock Be in 3 Years?

Here’s why CNQ stock could continue to outperform the broader market by a huge margin over the next three years.

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Valued at a market cap of $55 billion, Imperial Oil pays shareholders a growing dividend yield of 2.4%. Is the…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Where Will Imperial Oil Stock Be in 1 Year?

Imperial Oil is a TSX energy stock that has delivered market-thumping returns to shareholders over the last two decades.

Read more »