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Page added on February 28, 2013

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Threat of Oil Price Spike Has Passed

The days of worrying about the threat of a devastating oil price hike are over, according to a white paper from The Boston Company Asset Management (TBC), LLC, the Boston-based equity specialist for BNY Mellon.

For decades, pundits have been trying to predict the point at which a sustained climb in oil prices would spark a near-collapse of the global economy. However, TBC’s February 2013 paper, End of an Era: The Death of Peak Oil, contends structural shifts in the energy industry have insulated the global economy from dramatic spikes in oil prices, while simultaneously creating an array of investment opportunities.

After years of indifference, U.S. consumers have radically reduced their consumption of petroleum and related products, moderating demand in the world’s largest market, according to the report. Concurrently, heightened investments and technological breakthroughs, such as fracking, have spurred an explosion in resources, creating balanced supply and demand, the report said.

Areas of investment opportunity highlighted in the report include exploration companies, energy service companies, pipeline and transportation companies, companies that benefit from the low cost of gas and associated liquids, and companies that sell products to firms that directly are involved in natural gas and oil production.

The changing environment for energy has created potential traps for investors, warns Robin Wehbe, who heads the energy research team at TBC and is a co-author of the report.  “Exploration companies have become victims of their own success as natural gas discoveries have led to a glut of new supply and depressed prices,” he said.  “However, investors who can identify exploration companies operating in the most profitable and prospective shale plays can find opportunities.”

Energy services companies drill wells and perform other services for the exploration companies.   The report notes that services companies operating technologically advanced horizontal operating drilling rigs are integral to recovering the new sources of oil and gas from shale.

Increasing shale and oil production also is likely to create demand for more pipelines, separation and storage facilities to move crude oil and gas from the wells to refineries and other users.  With the relatively strong predictability of future revenues, pipeline companies can then pay higher dividends to shareholders, the report said.

Utilities are expected to benefit from lower fuel costs, and lower natural gas prices are expected to benefit U.S.-based chemical companies, according to the report.  These benefits also are expected to extend to refineries and manufacturers, the report said.

yahoo



7 Comments on "Threat of Oil Price Spike Has Passed"

  1. J-Gav on Thu, 28th Feb 2013 1:58 pm 

    Jiminy Cricket journalism : remember the song “When you Wish upon a Star?”

    Another lesson to this effect, which will probably also go unheeded, will be the loud noise that the present US natgas bubble makes when it goes “Pop!” in the next few months. Then, instead of everybody reaping the benefits, it’ll be more like everybody (except a few insiders) picking up the pieces … and the tab.

  2. actioncjackson on Thu, 28th Feb 2013 2:52 pm 

    This is obvious to you guys here on this site, but everyday I feel like we get closer to collapse and that it’s increasingly solidified into our future. There’s too many powerful lobbies for meaningful positive change to happen.

  3. J-Gav on Thu, 28th Feb 2013 5:34 pm 

    Action: You’re right about the lobbies but remember – the word ‘collapse’ (for systems, Empires and all the rest) can have different meanings, depending on where you are and what preparatory measures you’re able to take before it happens.

    Why expect the ‘positive change’ you speak of to come from anywhere but yourself? Networking with friends, community, etc can only come afterwards … and that’s already included in your internet username.

  4. hubbertsfreak on Thu, 28th Feb 2013 6:09 pm 

    I have to assume that the people that write this stuff are not morons, they understand that when it costs $70 to pull a barrel of shale oil out of the ground, that is the cheapst price they will sell it to the next person (if they want to stay in business). I therefore conclude that they are telling bold-faced lies. One example: refineries are not benefitting from lower costs. Their crack spread is razor thin. Refinieries are being spun-off, sold, or just closing all over the US.

  5. hubbertsfreak on Thu, 28th Feb 2013 6:36 pm 

    I actually found the source document right on their website. Check out this disclaimer near the conclusion: “If the use of fracking were curtailed, a large portion of our thesis would unravel, and supply-shortage-induced price spikes would be back on the table.” They then go on to explain all the risks of fracking, pollution, lack of water, etc, and then say that they are all minor. I don’t know why this particular report infuriates me so much, but it just does.

  6. GregT on Thu, 28th Feb 2013 7:15 pm 

    There will be another “oil price spike”. It is only a matter of time. The damage already done by the last spike will pale in comparison.

    Invest in your future wisely.

  7. J-Gav on Thu, 28th Feb 2013 10:25 pm 

    H-freak: yep, bold-faced lies has been what it’s all about for some time now and there are good reasons to be infuriated. Now move to the next step, preferably without assault weapons.

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