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The oil industry has been through some tough times during the last four decades, but recent allegations that fossil fuels are linked to environmental catastrophes, and the lack of fiscal performance have oil companies facing a new storm the size of Hurricane Dorian.

Politicians expressed outrage in the 1970s when prices rose alleging oil companies were making “obscene profits.” Washington imposed the crude oil “windfall profits tax.” Later President Clinton proposed and Congress almost passed a tax on the energy content of oil known as the Btu tax, and  President Obama proposed a cap-and-trade law on oil production, which passed the House but narrowly failed in the Senate. All of these issues were designed to increase the cost of oil.

Most of the 20-some Democratic candidates for President have proposed some form of restrictions, reductions, or total ban on oil in the future. Senator Bernie Sanders, who is within the top three contenders in many polls, has the most outrageous ideas. Sanders wants to:

• ban hydraulic fracturing, drilling offshore, drilling on federal lands;
• prohibit “imports and exports of fossil fuels”;
• cancel oil pipelines already being built and future construction;
• halt permitting of “new fossil fuel extraction, transportation, and refining infrastructure.”

He wants renewables to provide all electricity and transportation needs by 2030.

Even though President Trump has proclaimed an “energy renaissance” in the U.S. from the dramatic increase in domestic oil production, he has urged OPEC to increase oil production in an effort to keep oil prices soft.

All of this talk from Washington has added to the volatility and uncertainty for U.S. oil companies and their investors. Many companies that have participated in the high-cost of drilling and producing oil from shale formations struggle to maintain balanced books and keep investors happy. Already 26 companies have filed for bankruptcy this year, almost matching the 28 filed during all of last year, according to The Wall Street Journal (WSJ).

The WSJ also reported that energy companies with junk-rated bonds were defaulting at a rate of 5.7 percent as of August, according to Fitch Ratings, the highest level since 2017. “The metric is considered a key indicator of the industry’s financial stress,” the WSJ said in the story published on Aug. 30.

“The pressures are due to companies struggling to service debt and secure new funding, as investors question the shale business model,” the WSJ reported.

Many of the companies experiencing financial problems are independent producers, who rely on outside investors to fund drilling and development projects. Most of the companies grabbing the big headlines are publicly traded, but privately held companies have been caught in this spider web, too.

The major, integrated oil companies have avoided the debt problem, but investors don’t like the volatility and concerns for future demand. Oilprice.com reported on Tuesday that ExxonMobil dropped from the top ten companies in the S&P 500 by index weight in August (it is ranked 12^th) as investors have lost interest in energy stocks. The energy sector accounts for 4.4 percent of the S&P 500 index compared to 11.7 percent 10 years ago.

Oilprice.com also reported S&P 500 is up nearly 15 percent this year, while the energy portion of that index is down more than 3 percent.

Alex Mills is the former President of the Texas Alliance of Energy Producers.