My thoughts on the subject of oil investments from a more positive perspective.
Considering current world events, one must also consider the lessons learned from the past. So expect that these world events will overcome this administration’s desire to replace oil and gas in the marketplace.
Demand for oil and gas will continue unabated, and will likely even increase. This is not a coincidence. Petrochemicals and oil and gas are used in almost all products and activities found in our daily lives and nothing I see will change this.
The GOM Rig Count is up 57% from a year ago and is up 10% from last week. As of Friday, October 20th the total GOM rig count reflects 22 rigs.
Recall from history that, over a 5 month period near the end of the Iran-Iraq War in 1987, the GOM Rig Count almost doubled and Offshore Louisiana held the title for the most increased output in the USA during this period.
The current focus by some on eliminating oil and gas and gasoline powered vehicles is based only on a political desire. It is a premature and doomed tactic that will not be the significant portion of any viable near-term energy future because the country will not support it and what is required in reductions for our standard of living.
Do not risk your principal by following the crowd seduced by the propaganda. The winds of necessity will ultimately blow the renewables crowd off to the side and out of the way until such time as future technologies provide the required economic solutions to make them competitive in the marketplace. They only exist now because of subsidies from your tax dollars and are still far too expensive. A bonafide short target perhaps?
Be ready for the next cycle. Geopolitics and capital investments near areas in conflict can be problematic and it is not uncommon for global commodity prices to experience large increases as a result of these hostilities. Now may be a good time to get positioned in oil and gas before the prices start trending upward. But, be warned, this is a time sensitive issue. Clock ticking.
The temporary suspension of oil sanctions with Venezuela appears to not have swayed the market away from serious concerns regarding production in the Middle East. And current events do nothing to reduce these tensions. Mostly it is the opposite. Please, fasten seatbelts and prepare for turbulence.
The moral to this story is to keep a portion of today’s investment dollars in oil and gas energy, particularly including a focus on the GOM and other U.S. assets. Especially those paying a dividend or anticipating large returns from drilling projects.
Although the typical market fluctuations will be present and offer trading opportunities, the trend will be that the value of energy investments will continue to escalate, with potential for pay outs far into the future. Remember, the SPR has been seriously depleted. Demand could become an issue. Production will be an ever more valuable commodity and the GOM will be right in the thick of it.
Be cautious to not be caught out of the market, as many of the significant upward moves could occur without prior warnings as oil traders position for critical growth in market share and lock-in long term contracts once they adjust to the market volatility and recognize that growth in demand for oil and gas is unavoidable.
As long as entering the markets for oil producers and oil drillers during this ‘lull’ before the prices rise, investors will be on the best path to ROI from energy earnings while still being capable of managing risk.
So now is the time to act. Again, time sensitive. It is not required that a move is made at the absolute lowest price, but it is better to not be too late to the party. It is no coincidence that integrated oil majors are making big moves worth a lot of money, like XOM in the Permian and CVX in Guyana. Contagion may follow them. Watch for it.
My advice? Prepare for another boom in energy. One that may last for a while.
Mrs. Smith
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