Over the last 30 years Crude oil consumption has steadily increased worldwide. Each of the last 30 years has seen an average increase in consumption of 1.57%. Firstly it must be made clear that no matter the current state of oil supply, it is a finite resource . There is certainty that in the future, Oil consumption will continue to grow while supply will continue to diminish. The result of this is increased value of Petroleum. Aside from the inevitable, two major assumptions must also be made when determining the future valuation of crude oil .
The United States of America is well known for their intervention within OPEC nations. The first assumption that will be made is that the USA will remain militarily present in OPEC nations in order to secure their excessive oil requirements. (USA consumes the most oil in the world at a rate of 18.8 million barrels/day. The runner up is China at 9.7 million barrels/day.) Nearly all wars in recorded history have been fought over control of territory or the acquisition of resources. Inevitably, conflicts will arise due to their large military presence and political instability. War is expensive, destructive and disruptive. A few methods of funding war are to raise taxes, print money ( ) or to go into debt. All of which weaken the economy of conflicting nations. The general correlation between the US Dollar and crude is inversely proportional. As the US Dollar depreciates in value, Crude appreciates and vice versa. One particular example of this is the Gulf War. In 1990 within a mere 3 months the price of Crude skyrocketed 140% from ~$17 a barrel to ~$40 a barrel as a result of the war. Therefore, any future conflicts in the Middle East will result in tremendous growth in the value of Crude. The greater the severity of conflict, the greater the increase in price.
The second assumption that will be made is that Scientists will not be able to find a crude oil substitute and that technological advances in renewable or alternative energy will not outpace petroleum consumption. This is very likely for numerous reasons. In order to understand Crude oil’s future growth, one must understand it’s ubiquity within global commerce. Such a substitute, especially in plentiful quantities, is chemically impossible due to petroleum’s easily manipulable hydrocarbon structure. All plastics are synthetic polymers derived from oil . Innumerable products contain or are composed of oil . Current global agricultural practices are heavily dependent on insecticides, a product of petroleum. There are 800 million internal combustion vehicles on the planet. Airplanes, trains and cargo ships are also all dependent on the energy of fossil fuel. Alternative and renewable energy sources are currently, for lack of a better term, underwhelming. Even if alternative energies could somehow produce adequate electric power, enough to meet global needs, it is useless to every internal combustion vehicle, plane, train and cargo vessel. Crude oil literally fuels global commerce.
In summary, Crude Oil is a finite resource being consumed at an exponentially growing rate. Future conflict is bound to arise in the Middle East due to the fact that Oil is such a critical resource . Chemically, there is no substitute for the malleability and diverse applications of Petroleum. Economically, Crude oil is the backbone of global commerce.
Thank you for taking the time to read my Report. I strongly encourage you to leave your thoughts, comments and a like because I put a lot of effort into this. Thank you and Happy Trading!
I have been watching oil since it's down fall last year. I am not good at technicals, so I try to stick with fundamental supply and demand. because of OPEC( mainly Saudi) decision last November, there is a lot of supply compared to demand.
My idea was to buy oil stocks in a long term view of 10 years, when the supply comes down. I held my nerves when oil bounced back to 60 in May, bcos I was watching supply it was still high, in fact US, Canada, Russia and middle east were pumping more. Thanks to my patience, as expected oil came down again.
Still watching supply mainly in USA, if it shows any signs of decline that's when I like to get in.
Wanted to know what you guys are planning to buy call options, big oil stocks or smaller ones. I have this struggle explained below, need your help
if options need to know a time line which no one knows. I believe in ATM call options when oil touches mid 30's. The reason is summer driving season is coming to an end and Iran is waiting to pump to add to the glut.
If oil stocks, big oil stocks are only 15% down on average when compared to a 50% decline in oil prices which tells me many investors are still holding a big chunk. Don't know the entry point. While low oil is going to be true for quite a while, I don't wanna be the prey for the hungry investors who are waiting to get out.
Need opinions on how how to play oil safely. What and when to buy on a conservative approach, max risk I can afford is 10%. I am looking at an investment of 15k usd for a time period of 10 years.
Thanks in advance and cheers.