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Oil spill poison for drillers' shares, but weak economy worse Add to ...

When it comes to disasters and explosions, nothing quite compares to the brute force of the global economy.

The performance of oil and gas drilling stocks over the past couple of years illustrates this point rather well. Take Transocean Ltd., the drilling company currently sharing the dubious spotlight with BP PLC over the massive oil spill in the Gulf of Mexico: The disaster has knocked about $40 (U.S.) off the company's share price over the past two months.

However, compared to what the global economy has done to the stock, the oil spill looks like a flesh wound. Prior to the global recession, Transocean shares traded as high as $160, with high energy prices driving demand for the company's drilling services.

The recession, combined with a plummeting price for crude oil, sent the share price diving by $110 by early 2009 - a swift decline of nearly 70 per cent in a matter of months, and one that had absolutely nothing to do with the Deepwater Horizon tragedy.

Put another way, the current depressed level of Transocean's share price merely puts it back to its recessionary depths, and that's after U.S. senators have demanded the company postpone making a $1-billion dividend payment to shareholders.

What's more, Transocean's share price isn't even out of line with other stocks within this industry. The S&P 500 oil and gas drilling index fell 74 per cent between 2008 and 2009. Despite a bounce since then, the group of stocks is still down nearly 60 per cent.

The flip side to this observation is that an economic recovery - one that coincides with rising energy prices - will be far more helpful to the share prices of drillers than any resolution to the oil spill in the Gulf of Mexico.

Right now, the price of oil - still at half its peak level - is being held back by sputtering economic growth among developed economies along with an attempt by China to tame its rate of inflation. If the global economy pulls through, though, you don't have to be a crazy optimist to think that energy prices will go along for the ride.

Just as a declining economy hit drillers hard, an improving one will put them back on track.

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