Curtis Hesler On Investing for $100 Oil
You need to be investing now for $100 oil in the future. - Forbes Online
In a recent article, Investing For $100 Oil, Forbes magazine contributor Curtis Hesler discusses the economy, future demand, and how it could affect oil and gas investments. He begins by explaining the status of the market as he sees it: I think we are already in a recession. I expect it to be powerful, but I don’t see it affecting the global demand for raw materials. Domestic demand for energy will continue to increase, regardless of a recession. Although Hesler’s statement tends to go against conventional wisdom, there may be good reason to expect he’s right this time around. In rapidly growing economies such as China and India, the increased demand for petroleum products stems from intense effort toward industrialization and is not likely to significantly decrease regardless of cost. In the U.S., recessions typically dampen demand for petroleum used to produce luxury items, while demand for petroleum used to make essential products is less likely to experience significant dropoff. Recent trends show that U.S. households are spending larger proportions of income on essentials and therefore may not have the ability to trim consumption as much as in the past. Despite market unrest, current projections by the International Energy Agency (IEA) estimate demand will rise an additional 2.03 million barrels per day in the last quarter of 2007. Meanwhile, production is falling in Venezuela, Iraq, Iran, Indonesia, Libya, Nigeria, Kuwait, Mexico and Russia. Saudi Arabia is pushing on a string to maintain production at current levels. The production constraints Hesler refers to are likely to result in continued supply crunches and higher petroleum prices. According to the IEA, the world will experience a significant supply crunch some time in the next five years. Analysts believe that increasing demand and tight supplies will drive prices to $100+ per barrel in less than a year. Speculations on what happens beyond that point vary, but the overall consensus is that oil prices are in a long-term uptrend. Not surprisingly, oil and gas investments are becoming increasingly sought out as a valuable addition to many types of investment portfolios.Published Thursday, October 25th, 2007 at 6:00 am and filed under Industry News.