Iran Oil Could Cast a Shadow on Solar

Alongside the fall in the China stock market, we've started to hear more about the continued drop in copper, or as some call it Dr. Copper, given the metal's use as a barometer of global economic activity. The other natural resource making headlines lately is oil. What? You were thinking I was going to talk water and how former Magnum P.I. star Tom Selleck is being accused of stealing water during the California drought? Nope, it's oil, and the reason is the U.S. and five other major global players are negotiating with Iran to restrain its nuclear program in exchange for economic sanction relief. Relief from those sanctions would include Iran's ability to export oil again. A recent Reuters poll of 25 economists and oil analysts forecast 250,000 to 500,000 barrels per day (BPD) of extra Iranian crude oil would become available on the world market by the end of this year, with an extra 500,000 to 750,000 BPD on the market by mid-2016. Given the on-again economic malaise that has China contracting and weak industrial demand again here at home, the demand picture for oil is looking weak, but the return of Iranian oil could result in even greater excess supply and ensuing price erosion. Not just price erosion in the price per barrel of oil, but in gas prices as well. Great news if you are United Continental (UAL), JetBlue (JBLU), Virgin America (VA) or another airline. Good news if you are a consumer, but following a string of weak retail sales data earlier in the year, including holiday-filled December, the stimulative or tax break effect of lower gas prices may not translate through to consumer spending. As we saw several months ago, perhaps all those millions of Americans without retirement savings or even rainy-day funds may look to bolster their savings. If this scenario comes to pass, it could be bad news for companies that thrive when oil prices are booming -- solar companies like First Solar (FSLR), SunPower (SPWR) and SolarCity (SCTY) and ones that are attached to the wind energy market, including Windstream Holdings (WIN), NextEra Energy (NEE), Xcel (XEL) and Sempra Energy (SRE), among others. Another that could fall into that camp is Tesla Motors (TSLA) as even cheaper gas could curb demand for the company's high-priced, all-electric vehicles. Among all of those, SolarCity has filed and been granted several confidential treatment orders with the Securities & Exchange Commission over the last few months. Such orders may be granted by the SEC under the Securities Exchange Act of 1934 and allow a company to request that any filing with the SEC be treated as confidential and not disclosed to the general public. Reasons for the request tend to center around the view that the information could cause material or financial harm to the company or a business partner. When granted, the information tends to be kept confidential for a certain period of time, which sounds like simply prolonging the inevitable. SolarCity was granted confidential treatment orders on March 18, June 23 and July 7 relating to recent 10-Q and its 2014 10-K filings. There are several possibilities as to what could have led SolarCity to request these treatment orders, including the fallout from FBI and Oregon Department of Justice criminal and civil investigations following reports the projects should not have been eligible for state tax credits. Other possibilities include the findings of federal investigators after spending nearly a year combing through the books of two solar-energy companies tied to billionaire, SolarCity Chairman and Tesla CEO Elon Musk following claims the businesses overvalued sales contracts in order to claim millions in federal assistance. Before that, SolarCity was already in the crosshairs of the U.S. Treasury and IRS, which tried to determine if SolarCity deliberately cranked up the cost of products to cash in on the government grant program. To me, those are reasons to avoid SolarCity shares even more than those for other alternative energy companies, should sanctions against Iran be lifted.

Iran Oil Could Cast a Shadow on Solar

Swelling supply would hurt companies that thrive when oil prices are booming.

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