Is Owning BP plc (ADR) (BP) Stock More “Sinful” Than You Think?

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At the end of March, I recommended that if investors had to choose between BP plc (ADR) (NYSE:BP), Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX), I’d go with BP stock because it’s got the most upside.

BP stock

I still feel that way.

However, that was speaking strictly as an investor, not as a caring human being.

A new report suggests American taxpayers would each be willing to pay $153 more in taxes to prevent another oil spill like BP’s Deepwater Horizon in 2010. That’s $17.2 billion annually for the next 15 years to avoid this kind of disaster. BP itself has put aside more than $50 billion to deal with all the various stakeholders that were hurt by Deepwater Horizon.

Another Take on BP Stock

It’s great that Americans feel so strongly about protecting the country’s natural resources while also preventing further loss of life caused by these types of disasters. However, as long as people continue to invest in energy stocks, especially those drilling in the Gulf of Mexico and other offshore sites around the world, you’re really not helping the cause.

If you own an ETF such as the Vanguard 500 Index Fund (NYSEARCA:VOO) — Warren Buffett’s recommendation for most investors — you’re indirectly investing in energy stocks like XOM, a top 10 holding.

While energy stocks account for just 6.6% of VOO’s $310.7 billion in net assets, that’s still $20.5 billion invested in companies like BP (BP itself is not part of the index) who’re putting the environment at risk everyday — and that’s just one of several ETFs and mutual funds based on the S&P 500.

The other aspect that seems perplexing to me is why American taxpayers should have to fork over their hard-earned income to prevent something that companies like BP should already be paying for. Sure, it has set aside a huge amount of money to deal with Deepwater Horizon, but only because it got caught with its hand in the cookie jar. It’s like a carjacker offering to return the stolen car to its rightful owner in exchange for staying out of jail. Not going to happen.

Energy stocks, in some respects, are worse than cigarette stocks because at least in many parts of the world graphic packaging warnings exist that let consumers know cigarettes cause lung cancer, etc. Even better, countries are moving toward plain packaging rules that will make cigarettes even less attractive.

Cigarette makers have accepted the hostile selling environment in which they market their products; I’m not sure BP and all the other oil companies have done the same. BP’s website talks a big game about acting responsibly; given the financial impact of Deepwater Horizon, I would hope so.

Here in Canada, where I live, we have five exceptionally stable banks that are the envy of the global banking industry. However, lately, the banks have come under scrutiny for high-pressure sales tactics like those practiced by Wells Fargo & Co (NYSE:WFC) that bring into question the way in which these banks generate billions in annual profits to pay out those marvelous dividends income investors are addicted to.

Bottom Line on BP

It takes courage and conviction to invest in companies whose business practices are detrimental to the world in which we live, but at the end of the day, it’s all about providing for your family. I get that.

However, this answer by marine ecologist Steven Murawski in a recent Science magazine Q&A should at least make you think twice about investing in BP stock.

“Every one of the scientists will tell you that we are not prepared even now. We do not have enough baseline samples. And that is so important. Given the fact that this industry is out there, and it’s a risky business. It should actually be a requirement to periodically gather baselines, like every other polluting business,” said Murawski. “Wastewater treatment plants gather periodic data on what they are discharging. And the oil industry has avoided any mention of gathering routine baseline data about what they actually do. It would have been so much easier for us to find out what the Deepwater Horizon effect was, if the regulators had required simple sampling of sediment, water, and fish.”

I wouldn’t invest in BP stock, but that doesn’t mean you shouldn’t.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/bp-plc-adr-bp-stock-more-sinful/.

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