Tesla Motors Inc (TSLA), Total SA (ADR) (TOT): Is the Oil Market Broken?

BP’s recent oil spill in the Gulf of Mexico took a big hit on the company, and it was forced to sell a number of its precious oil fields. BP’s debt load is healthy with a total debt to equity ratio of 0.36 and a quick ratio of 0.9. The company has decided to exit renewable energy just as solar is becoming cheaper than traditional resources. The company put its money into clean energy before the time was right, and now it looks like BP plc (ADR) (NYSE:BP) is walking away too soon.

Total SA (ADR) (NYSE:TOT) is a major French oil company that also sunk funds into renewable investments, but it has decided to stay the course. In recent years it accumulated a majority position in the solar manufacturer SunPower. SunPower is expected to return to profitability this year, proving that oil and gas companies can make smart investments outside of petroleum.

Total SA (ADR) (NYSE:TOT) owns around 65% of SunPower, but the stake is only worth a little more than $2 billion. With a market cap around $120 billion, Total SA (ADR) (NYSE:TOT)’s interests in the solar industry form a very small portion of its assets. It continues to expand its operations in Uganda and Nigeria. The company’s ROI of 9.3% and profit margin of 4.4% are rather low. It is better to buy Total SA (ADR) (NYSE:TOT) as a forward looking oil giant that is willing to make the transition to alternative fuels than as a highly profitable oil company.

Conclusion

Higher prices simply are not leading to the supply increases that the oil industry is hoping for. Sinking all of your investment dollars into genetically engineered algae or Tesla Motors Inc (NASDAQ:TSLA) is a very risky proposition. Investing in Total SA (ADR) (NYSE:TOT) offers a good compromise between both worlds. Unlike BP, Total SA (ADR) (NYSE:TOT) has been able to make profitable investments in the solar industry while it continues to grow its oil business.

The article Is the Oil Market Broken? originally appeared on Fool.com and is written by Joshua Bondy.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors and Total SA. (ADR). The Motley Fool owns shares of Tesla Motors. Joshua is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.