Why the Santos Ltd share price has been CRUSHED today

One of the worst performers on the local share market today has been the Santos Ltd (ASX: STO) share price.

At the time of writing the oil and gas giant’s shares are down 7.5% to $3.37, bringing them within a whisker of their 52-week low.

Why have they fallen?

Today’s sell-off is related to the government’s plan to introduce a new Australian Domestic Gas Security Mechanism that aims to halve gas prices.

The government plans to impose tough export controls, going so far as blocking exports if it reduces the availability of gas in the Australian market.

This is a big win for Australian businesses and households which will finally have affordable supplies, but it will be a big loss for oil and gas companies which have profited from the high domestic prices.

It’s not only Santos sinking lower on the news today. The Origin Energy Ltd (ASX: ORG) share price is down over 3%, and AGL Energy Ltd (ASX: AGL) and Woodside Petroleum Limited (ASX: WPL) are also in the red.

Should you buy the dip?

I’m not overly bullish on oil and gas prices moving forward, so I would suggest investors resist the temptation of snapping up shares today.

If oil prices do somehow rebound strongly over the next 12 months, Santos could be a great option for investors.

But ultimately I believe increasing production in the United States from its shale producers will offset OPEC’s production cuts, holding prices down for the foreseeable future.

So for now I would suggest investors continue to focus elsewhere in the market.

These fantastic shares would be far better options for investors in my opinion. I expect them all to vastly outperform Santos and its peers over the next 12 months.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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