Oil & Energy

Introduction

The future of the oil industry is undergoing significant transformation due to various factors, including the growing shift towards green energy, environmental concerns, technological advancements, and changing global energy policies. We asked Tom, who owns Annapolis Limo Service and is a regular contributor on this website due to his oil interests. Here are Tom’s insights into the trends and possibilities shaping the oil industry’s future.

Transition to Green Energy

The global push towards green energy, driven by concerns about climate change and the need to reduce carbon emissions, is having a significant impact on the oil industry. Renewable energy sources such as solar, wind, hydroelectric, and electric vehicles are gaining momentum as viable alternatives to traditional fossil fuels.

Potential Scenarios

1. Diversification and Adaptation: Many oil companies are already diversifying their portfolios to include renewable energy projects. Some are investing in technologies like carbon capture and storage (CCS) to mitigate emissions from their operations.
2. Decline of Oil Demand: The ongoing transition to green energy and increased adoption of electric vehicles could lead to a decline in global oil demand, making the oil industry a secondary or tertiary player in the energy sector.
3. Evolving Energy Landscape: The oil industry might continue to be an important energy source for certain sectors like transportation, aviation, and heavy industry. However, its dominance may decrease as cleaner alternatives become more prevalent.

Impact on Oil Reserves

The impact of the shift to green energy on remaining oil reserves is complex and depends on various factors:

1. Demand and Prices: As demand for oil decreases, prices might be impacted, potentially making some reserves less economically viable to extract.
2. Stranded Assets: Some oil reserves might become “stranded assets” if they are not economically feasible to develop due to low demand or high extraction costs.
3. Technological Innovation: Advances in extraction technology could make certain reserves more accessible and cost-effective to develop.
4. Geopolitical Considerations: The value and utilization of oil reserves might still be influenced by geopolitical factors and energy security concerns.
5. Transitioning Economies: Oil-producing economies heavily reliant on oil revenue might need to diversify their economies to adapt to changing energy trends.

Summary

In summary, the future of the oil industry is evolving due to the global transition towards green energy. While the industry might not disappear entirely, its prominence could diminish as cleaner alternatives gain ground. The fate of remaining oil reserves will depend on economic, technological, geopolitical, and environmental factors. The industry’s ability to adapt, innovate, and collaborate with the growing renewable energy sector will shape its role in the broader energy landscape.…

Clark Weeks may not be liking the oil industry as much these days. The oil and gas industry has not been doing well lately due to several factors, including the reduced costs of renewable energy, concerns about global warming and climate change, and the overproduction of gas and oil. But the worst happened once the COVID-19 pandemic arrived when people were bound to stay at and work from home worldwide.  

So, what are the effects of the pandemic on the gas and oil industry? Let us have a look.

Lowered Prices Due to Oversupply

The US was recognized as the world’s largest natural gas producer in 2011 and the largest oil producer in 2018. But that caused many gas and oil companies to go bankrupt since they borrowed large amounts of money when the prices were sky high and produced so much gas and oil that overabundance of supply resulted in lower prices.

So far, the prices of oil have dropped around 40% this year and the cost of a barrel now hovers around $40. But so many fossil-fuel projects now require a minimum of $50 per barrel to be monetarily feasible and secure investment.   

What’s more, a number of large conglomerates have heavily invested in oil and gas exploration. But with such low prices, it is not economically viable to exploit the new-found resources that could be considered “stranded assets;” which refers to investments that are fruitless and of no value.

Failing Demand Resulting in Bankruptcies

More than 200 US-based oil and gas companies have gone bankrupt since 2015. The small oil wells that small investors such as Clark Weeks had liked are also struggling depending on their cost of production. The COVID-19 impact has caused the global oil demand to fall by 30 million barrels a day. Since 1980, US oil production saw its sharpest decline in May 2020 to around 2 million barrels a day. The IEA expected that 2020 might see the largest fall in oil demand in US history and this economic slowdown would take months to reverse back.

What the Future Holds?

Now the question arises, is the gas and oil industry heading towards an irreversible decline? Well, there is no surefire way to answer this question since we do not yet know when the COVID-19 pandemic will eventually stop affecting our lives worldwide. Many factors are at stake here, including when a vaccine will be available and how the governments will respond.

However, industry experts are predicting that better days are coming for the oil industry. People are now using one-time plastic products more than ever, which equals to an increased demand in plastic; and plastic production requires the use of oil in case you did not know that already.

Another possibility of increased oil consumption lies in use of used cars. Since public transportation is now being avoided by people most of whom do not have enough money to buy a new car, they are now purchasing used cars that are not so fuel-friendly.

Wrapping It Up

The gas and oil industry might be able to recover from the severe COVID-19 impact spread worldwide. However, over the next few decades, many large companies might change their course and focus on green businesses. For now, let us see when this pandemic ends and how the industry performs once recovered.…

Another one of Clark Weeks’ interests is small oil wells. They have traditionally been great investments. The pandemic is having an impact with oil production as with so many other things.

The COVID-19 crisis has given rise to many ‘firsts’. Adding to this list is the fall in oil prices with the commodity reaching below negative for the first time in human history. However, the pandemic is not solely responsible for this drop. Russia and Saudi Arabia are the world’s leading oil exporters. The ongoing price war triggered by these 2 nations is another major contributing factor towards this sudden drop in global oil prices.

Effects of Oil Price Crash on Countries

Most Middle Eastern economies like UAE, Kuwait, Saudi Arabia, as well as Venezuela, depend almost solely on the revenue generated from exporting oil. Therefore, any massive fluctuation in the oil price has an equivalent impact on these countries. Africa, too, has not been left unaffected by the global oil price crisis. As the continent with one of the youngest populations, countries like Nigeria have been on the fast-track for growth in recent years. However, the plummeting oil prices have put a dent on the nation’s growth.

In many countries around the world oil production is run by the government or by companies with close ties to the government. In the US, this is not the case. There are many large companies involved in production here as well as worldwide. However, the US has many small independent oil producers as well which Clark Weeks, an industry expert, is concerned about.

Effects of Oil Price Crash on Global Markets

Apart from threatening the economic stability of oil-exporting nations, the uncertainties in the oil industry may also render a large chunk of its global workforce jobless. The USA employs nearly 10 million people in the oil and gas sector and Saudi Arabia attributes 50% of its GDP to oil export. Likewise, the oil and gas sector make up 30% of the Russian GDP and employs over a million people.

All of these circumstances have raised a cause for alarm regarding the very stability of the global oil sector. Where in the past, the oil industry has been instrumental in driving economic growth for nations all over the world, today the industry is facing stagnated demand that is fast becoming a major problem.

Clark Weeks Concerned If Oil Prices Continue to Fall

While most Middle Eastern oil-producing nations are left with curtailed spending on government and social programs, some countries like Iran and Iraq are on the brink of social unrest if prices continue to fall. Nigeria derives nearly 9% of its GDP from oil export. It is also the most populous country in the African continent and one that is likely to be most severely affected by the falling oil prices.

Even if the situation begins to improve in the coming few weeks or months, it will be some time before these nations show any signs of recovery. Mostly because the global economy has to recover on the whole for the demand for oil to go back to what we have seen in the recent few years.

Countries are being impacted differently based on their cost of production. Some countries can still produce and make a profit despite the recent drop in prices. Many others lose money because the cost of production is over the current price of oil.

Interim Solution

India, China, the USA, as well as most European nations are the largest consumers of oil. As demand has almost come to a standstill here, they are refusing to buy more oil. According to experts, the situation will not change even in the second half of this year. However, the operational cost of producing oil is still very much real and this has put an additional burden on oil-producing nations of the world. In such a situation a midstream logistics and gathering oil company like the Texas-based Enterprise Product Partners have stepped in to take over the excess shipment. But this is a short-term respite and not a permanent solution. Clark Weeks and others are concerned that small oil wells will be disproportionately affected by the drop in demand.…

The words “pandemic” and “struggling” seem to be tangled with each other recently. The oil business, in general, is yet another casualty in this global crisis. While the effect of the pandemic goes across the board, from small to big oil companies, the big producers have some resources to back them up. The small oil producers will be taking the brunt of the hit. Some will have no choice but to shut their doors and lay employees off.

So, Why Are They Struggling?

Because of the pandemic-driven lockdowns, several businesses had no option but to close. In large cities and small towns alike, much of the electricity use comes from big companies. Yes, there will be more electricity at home, as family members huddle in to avoid health risks, but they do not use as much energy as companies in their big buildings. Travel has also significantly decreased. Big oil users, such as planes, have not been getting a lot of mileage due to the strict lockdown rules of each country. Nobody is interested in going anywhere else, but home. Even those who are not in their own homes cannot leave where they are for fear of getting infected by the coronavirus during travel or being trapped in quarantine centers for weeks.

What Are the Other Competitors?

Some energy users have also begun their transition towards cheaper and sustainable energy. Several households in the world, including a couple of Southern states in the United States, have shifted towards wind and turbine energy. This shift has been brought about by economic struggles. Businesses and households alike seek to save money as much as possible, as they face an uncertain future. The more stores close, the more people lose their jobs. Job losses do not inspire consumption. When consumption cannot be avoided, oil producers are losing to cheaper, renewable resources.

Why Are Oil Prices Dropping?

As oil usage drops, the cost also drops. A staggering crash from $70 a barrel to $20 from January 2020 to April does make the word “drop” an understatement. There is not a lot of demand. This situation may even continue for a few more years after we survive the pandemic. The lack of usage is not due to scarcity, but because several industries have had to halt operations. Imagine if the lockdown continues down this road. Prices may even get lower, and producers may not be interested in selling at those rates. Even though at low prices, people are happy to buy, they can only buy so much. Despite the low prices, demand is down and because demand is down, the price is low. So, small oil producers cannot even get a break from the pricing. The recent pandemic is undoubtedly highlighting the “survival of the fittest” aspect of living. The world may not have been completely stripped to its essentials, but the possibility has been laid bare. For small oil producers, there may be no option but to close. Even big oil companies will struggle, and oil suppliers are slowing down production because of recent events. Soon, some small oil producers may have no choice but to become part of mergers or to become wholly bought by more prominent companies. At the moment, the future still seems so bleak for them.…

Investing in the energy sector is a fairly broad subject and requires a good amount of due diligence. While oil is one of the most important energy resources globally, the energy sector also includes natural gas, renewable energy sources, coal, etc. However, oil remains the most attractive option when it comes to investment in the energy sector. Like most other investments, investing in oil is also fraught with risks and rewards. Various experts such as Clark Weeks recognize risks investing in oil. Moreover, oil prices have always been highly volatile, making it even more important to study the risks before taking the plunge.

Understanding the Risks Involved

Geographical

Most oil and natural gas exploration and extraction are based on geographical predictions. It is only once the drilling process begins that one can truly estimate the costs involved. Some terrains can prove extremely difficult to drill. Therefore, before investing, make sure that you do exhaustive research on geologist reports, especially if you are investing in active drilling projects. Geologists often use open-ended words like ‘probable’ or ‘possible’ in their reports. So, look out for such phrases and words and know what you are getting into.

Political

Exploration within regions that are replete with political instability can increase the risk involved for the investors. Politics has been a strong regulatory force in energy sector investments. While most oil and natural gas companies aim to invest in political regions, this is not the norm. Moreover, erratic political changes or severe modifications in the policies of the ruling government can prove to be detrimental for exploration and refining projects if they are not in the sector’s favor.

Market Related

Such political, economic, and geographical factors have always ensured that the oil sector’s market prices remain volatile and difficult to predict. In recent times, we have witnessed how political instability in the middle eastern region has led to fluctuations in oil prices globally. Therefore, it is important to study the company’s projects before making an investment. You can align your investments better if you know the company’s future plans.

Reaping the Rewards

Returns

The energy sector attracts one of the largest investments globally in spite of the risks due to its excellent returns. Additionally, with advancements in modern-day technologies, both drilling and excavation have successfully curtailed the amount of risk involved. Additionally, even though oil fields remain for decades altogether, as an investor, you can see returns on your investment within a year.

Tax Advantages

Most of the income earned by investing in the oil and natural gas sector comes under tax benefit schemes. Due to the high risks involved, governments offer rebates to attract more investors. If you have done your research and invested in this sector, then you are highly likely to reap profits as well as tax benefits.

Portfolio Diversification

It is interesting to notice that the oil stock prices are usually somewhat counter cyclical. Unlike most other stocks that are aligned to the economic situation, the oil sector allows you a tool for investment portfolio diversification.

A financial advisor, Clark Weeks says there are risks investing in oil, but that investing in oil wells can be a good thing to do for certain qualified investors.…

Clark Weeks Recommends Investments in Oil Wells for Certain Qualified Investors

There is no denying that industry experts, such as Clark Weeks, recommend investments directly in oil wells. As an industry that has been in existence since the 1850s, investing in the oil well business can add that required amount of diversity in your portfolio leading to higher returns and revenues. This is primarily because oil has become an essential part of human civilization today. And, we certainly can’t do without this commodity. Considering this, petroleum is bound to stay in high demand making oil wells a good investment for the future.

While direct investment in oil well can be fraught with risks, the returns and upside of this venture are tremendous. The following are the advantages that an oil well investment has over others.

Tax Benefits

Investing directly in oil wells can help you write off nearly 80% of your investment in the very first year itself. This is primarily because the oil & gas industry enjoys better tax deductions than most other sectors. The tax benefits continue well beyond the first year of investment. These massive tax deductions are designed to cover the innate risk that is involved when you invest in an oil well.

Better Control Over The Investment

When you invest directly in an oil well you are safe from any risks that might arise due to a boardroom decision. Unlike the oil and gas companies that are publicly traded and can expose you to unfavorable corporate decisions over which you may have no control. Additionally, investing directly in an oil well also allows you to pick and choose the projects that are in line with your investment goals and make more financial sense.  

Data Transparency

Data is very important. You can’t bet on a project without studying the data involved. Even if you don’t have a financial or legal background, you can hire these services and get reports that can help you assess a deal structure. This is not the case when you invest in the oil and gas sector as an indirect investment. Not all data is available in the market. Additionally, most of the available data is derived by financial analysts rather than engineers on the ground. Therefore, oil well investment covers this risk and provides you with excellent data transparency.

Risk Clarity

All of these benefits culminate in providing the investor with a better understanding of the proposed investment. Although publicly traded companies offer better diversification, it is not easy to evaluate the risks attached. On the other hand, with an oil well, you are just concerned about a single drilling project.

No doubt investing directly in oil wells can be a risky affair. However, you can easily avoid these risks by keeping abreast of the latest news, employing services of investment experts, and beginning with an investment amount that you are comfortable with. Even small oil wells carry the potential for large payoffs making the oil well investment one of the highly lucrative investment avenues.

Clark Weeks Suggests Looking at Oil Wells

Clark Weeks would like to help you make better returns assuming the risk is right for your portfolio. For more info…

In this article, we look on the different ways to invest in oil. We got input from Clark Weeks and others who invest in oil.

Oil has many uses in our lives today. It fuels our vehicles. It is used in the production of chemicals and plastics. It is also used in making waxes, lubricants, asphalts, and tars. Many fertilizers and pesticides are made from oil or its by-products. The uses for oil are endless and the demand is high so it’s not surprising if people choose to capitalize in oil

For Clark Weeks, Not All Ways to Invest in Oil are Good

There are a number of ways to invest in the oil market. You can look at the industry as a group of companies that provide different kinds of products and services to consumers. On the other hand, you can look at the industry as a commodity, and profit from the price changes of crude oil, diesel, gasoline and others.

Investing in Oil Company Stocks

This is a simple way to invest in oil. I’m pretty sure you are very familiar with the names of several large oil companies such as Chevron, ExxonMobil, British Petroleum, and Royal Dutch Shell. When you purchase oil stocks, you’re more aligned with the company’s performance than the commodity’s price.

However, before buying, research the financial performance of each company. You can look at their revenues, net income, earnings per share, and debt level. Then you can buy a stock through a broker. You can immediately buy the stock and pay the best market price available or you may want to buy a stock when prices decline.

Investing into a Master Limited Partnership

This a more direct approach when investing in oil wells. Master Limited Partnership or MLP is a tax-advantaged corporate entity. It’s like a stock that is publicly traded. It gives you the tax benefits of a private partnership, meaning you only pay taxes on distributions. Investing in MLPs make you a limited partner who gains shares in the profits but are passive in how the venture is being run. 

Before diving into MLPs, research their financial performance to help you decide which one to invest in. Your broker or investment advisor might have information about this or you may want to check online. Check the charging fees of MLPs and be careful of scammers.

MLPs are publicly traded. Because of this, they are easy to purchase. You can buy them online or buy a mutual fund that also invests in MLPs. This also means they are easy to get out of if you need to divest.

Investing in Mutual Funds or ETFs

This is another direct method in investing in oil. ETFs, or exchange traded funds are traded on a stock exchange. They can be sold and bought in a similar manner to that of stocks. The U.S. Oil Fund or USO is a popular ETF. You can also google other ETFs.

Do your research before investing into an ETF. Look at what the mutual fund is investing in. Most mutual funds purchase futures contracts. These are contracts where you would purchase oil at a price at a future date, hence the name. On the other hand, some ETFs invest in oil stocks. You can invest in oil ETFs through an investment advisor or an online broker.

Whatever your choice of investment, keep in mind that investing in these types of ventures, or any kind of ventures for that matter, have potential risks. Be aware of your own risk tolerance and investment horizon.

Clark Weeks Suggests You Invest in Oil Wells Themselves

For people who can handle the risk, Clark Weeks feels investing directly in the oil wells can have a much higher return. However, there is risk and it is only appropriate for some people. See our related post on this. …

Well, first because it is cold, damn cold as they say. We are actually talking about drilling in Canadian Arctic waters. It is hard enough to drill in warm water but drilling in Arctic water is that much tougher because of the remoteness and the weather.

Drilling Ban

However, right now, the even bigger reason is that is is forbidden. Justin Trudeau, the Canadian prime minister let it be know in December 2016 that oil companies could not drill in Arctic offshore water. Because of this, the Canadian government has been returning the deposits they received from major oil companies to the tune of hundreds of millions of dollars.

The ban extends through the end of 2021 and then will be reviewed. The review will be based on the latest science in terms of the potential environmental hazards and whether the drilling can be done safely with minimal risk to the environment. This review process is to take place every five years.

Little Demand if Ban Lifted

Even, if the next review decides to allow drilling to move forward, it is quite likely that none of the oil companies will have any interest. Currently, with new drilling technologies, there is enough oil in other parts of the world that is much easier to access. So, cheaper oil with less risk.

Drilling Problems

There are a number of problems with drilling in the Arctic. One is noise. That may seem odd since there is nothing nearby to hear anything. But when you consider marine animals as well as humans that changes. Between seismic exploration and drilling there is a lot of noise that can impact the various animals from whales to seals and walruses among others.

Next is remoteness. Getting supplies and equipment there is daunting. But also, if there is a spill, getting equipment there for the cleanup will be very difficult.

Sea ice is another issue. Not only in taking it into account when constructing oil rigs but once again in terms of clean up. There aren’t good methods of cleaning up oil in icy water and impossible if it flows under ice.

Ecologic recovery time is extremely slow in the Arctic so any problems could decades or longer for the environment to recover unlike in warmer climates.

Finally, there is natural gas and flaring. Because it is unlikely that an LNG facility will be created, the natural gas is likely to be flared off. That is better than letting it vent into the atmosphere because it can be a potent greenhouse gas. However, it can produce black carbon which absorbs heat and will melt snow and ice much faster when it lands on it. It also creates respiratory problems for the people who do work or live in the area.

With all these issues and risks, it is unlikely that we will ever see oil drilling in Canadian Arctic waters.

Invest in US Oil Wells

Only large companies can even think about drilling in the Canadian Arctic. However, for qualified investors, there are possibilities for investing in smaller oil wells in the US. See this post about it.…