The Oil & Gas Market
We believe that alternative energy sources are the future besides oil. However, it will take at least one generation to replace traditional energy sources like oil, natural gas or coal. The timing to invest into alternative energy sources is a little bit too early. That’s why we have decided to focus our efforts on the acquisitions of oil projects first and add alternative energy projects and natural resources later on when the timing is more favorable.
We believe that the oil price will recover and get back to a level of at least $100 per barrel in the near future.
Oil and gas are used widely in modern life. Oil fuels the cars, trucks and planes that underpin modern economies and lifestyles. Nearly all pesticides and many fertilizers are made from oil or oil byproducts. Gas provides electricity and is also used for cooking, heating houses and buildings, and heating water. Global reserves could almost double by 2050 despite booming consumption, oil major says. The world is no longer at risk of running out of oil or gas, with existing technology capable of unlocking so much that global reserves would almost double by 2050 despite booming consumption, BP has said. According to BP's Statistical Review of World Energy, global oil reserves at the end of 2012 were 1.7 trillion barrels. Given that the world consumes about 86 million barrels of crude oil per day, it would be easy to conclude we'll run out of oil in 50 years, or sooner if we increase production consumption.
What Happens When the Oil Runs Out? The world supply of crude oil isn't going to run out any time soon, and we will be producing oil for decades to come. However, what we won't be doing is producing crude oil – petroleum – at the present rate of around 30 billion barrels per year.
EVERYTHING REQUIRES ENERGY
There are millions of airplanes, cars, factories and engines that require oil on a daily basis. Try flying a plane without energy…or driving a car for that matter. Even plastic is made out of oil. Hardly anything we do can be done without exerting energy. It’s a basic need. So unlike some sectors that are dependent on consumer spending or others that have short-lived trends, energy is in constant demand. And while it’s not entirely immune to swings and recessions, energy is certainly a safe and stable place to invest in the long run.
The combined populations of India and China represent one-third of the world’s total population but only account for 12% of global oil consumption. In comparison, the U.S. represents 5% of the world population but uses 25% of its oil. As these economies grow, they will be consuming more and more oil as they buy more cars, ships, planes and machinery. They would like to reach the same standard of living we enjoy, which will place a lot of pressure on supplies in the future.
Oil is an international commodity that gives you exposure to world markets. Many developing countries are increasingly dependent on oil as a cheap source of energy to fuel their economic growth.
THE SIZE OF THE ENERGY MARKET
Valued at around $7 trillion globally, energy is the most valuable market segment on earth. Delivery of usable forms of energy to the world’s seven billion people is responsible for 10% of the world’s annual gross domestic product. A look at the ten worldwide companies that earn the highest annual revenue reveals that nine out of ten of them operate in the energy industry. That’s because energy is so pervasive. It’s required for every human endeavor. Because energy generates more revenue than any other industry, it is a prime place to stash your investment dollars.
According to the International Energy Agency, global energy demand will grow by more than 30% by 2035. China, India, and the Middle East will account for two-thirds of that growth. By then, global oil demand will be around 100 million barrels per day (mb/d) — up from 89 mb/d in 2012 — as the number of cars on the road will double to 1.7 billion. What’s more, oil prices are expected to rise to $125 per barrel by then. Demand for electricity is forecast to grow twice as fast as total energy consumption, leading prices to rise 15% by 2035.
To meet rising energy demands, the world must invest $37 trillion in related production and supply infrastructure across all sectors of the energy industry over the next two decades. Over half of that total — $19 trillion — will be required by the oil and gas sector for exploration, transportation, and production increases. The remainder will go toward the electricity sector, with $17 trillion to be invested in upgraded natural gas and renewable generation, and an upgraded transmission and distribution network that maximizes efficiency.
As a result of constantly rising demand and prices, energy investments have returned above-average results for decades. For example, look at ExxonMobil (NYSE: XOM): Between 2003 and 2013, Exxon returned 140% compared to the Dow Jones’ 40%. The same holds true between 1993 and 2013, with Exxon delivering 472% and the Dow returning 324%. And it’s not just Exxon. Over the last 15 years, The Energy Select SPDR ETF (NYSE: XLE), which holds a broad range of energy companies, outpaced the Dow Jones Industrial average by over 220%.
INSIGHT AND PERSONAL EXPERIENCES
Somewhere someone is always asking why gas prices are increasing. You never have to be that person if you invest in energy and follow it closely. You’ll know that gas prices are about to tick up a few pennies when you see crude oil futures head higher. Or you’ll know that when refiners switch off their summer blend, gas will be a bit cheaper in the fall. When you’re invested in something, you take notice and pay attention to what affects it. With energy, you’ll know how the market is impacting your day-to-day life.
SAUDI ARAMCO – WORLD’S BIGGEST IPO IN HISTORY IS COMING IN 2019
The biggest oil company in the world is Saudi Aramco, the national oil company of Saudi Arabia. It is expected to have a $2 trillion value, more valuable that ExxonMobil, Apple or Alibaba. The Saudis plan to offer up to 5% of Aramco in the IPO, at a predicted price of $100 billion, making it the largest IPO ever.
Markets expect Aramco, through Saudi Arabia and OPEC, will seek to increase the price of oil before the IPO to increase the proceeds from the IPO. This is because Saudi Arabia is the single most powerful country in OPEC. If the entire oil industry as a whole is going up, it will have a positive effect on all the other oil companies listed in the market.
PRICE OF OIL IS CHEAP AT THE MOMENT
For the past two years, energy stocks have looked quite weak, as the price of oil sank to a latter-day low of US$27 a barrel in February 2016. At that price, most oil producers can’t cover their operating costs, let alone fund the effort to replace their reserves. But as oil prices firm up around the US$50 mark, investor anxiety is abating. Industry fundamentals are clearly improving: American production is down, consumption is up and supply and demand are inching toward a balance.
And since there’s been so little investment in the sector for two years, there’s a high possibility of demand exceeding output in the future. That presents an enticing prospect for companies that maintained or increased production through the crash. Many experts believe that the price of oil should get back to $125 per barrel in the next 18 to 24 months.
What Experts Say
With the geopolitical risk factor firmly reinstalled into the market, oil prices have risen to four-year highs. Gasoline prices are up nearly 20% in the past year! This is noteworthy because U.S. oil (and gas) production has been soaring to record heights.
As global oil markets shift their attention from U.S. shale oil production back to a resurgent Saudi Arabia and Russia and geopolitical concerns bearing down on oil prices, Citigroup said last Wednesday that the U.S. is poised to surpass Saudi Arabia next year as the world’s largest exporter of crude and oil products.
Global Oil Group Inc.
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Global Oil Group LTD.
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