Every smart investor knows that the time to buy is when the economy tanks, and there’s nowhere to go but up. That’s been the case in 2016 where in February the price of oil sank to an all-time low of US $27 a barrel. At that price, the industry went flat. This year, companies couldn’t afford to operate let alone build and invest in new projects.
Smart investors also know that the best investments are usually the ones that most people don’t see. The ones that change the game of energy through innovation, efficiencies or new models of progress entirely. Some of the companies we’ve seen popping up this year that fall into the innovative efficiency category include; ambyint for their well optimization and Absolute Combustion International for their flameless burner solutions. Both of these companies are based out of Calgary, Alberta.
With oil prices are firming up around the US $50 mark investor caution is starting to ease up, and eyes are once again looking over the fence to see what may be on the horizon. Don’t get me wrong; the industry still struggles and it’s not over yet. But at least everyone’s breathing again, and the rebuild and adjustment phase seem to be settling in.
It certainly has been a shock to the oil industry to see oil prices virtually cut in half. It’s a matter of dollars and cents; take your paycheque and cut it in half and see how you fare. That’s what happened to the oil and gas industry in 18 months, and the effects are felt around the globe.
So you can look at all the chaos and demise, or you can see through the lens of a savvy investor. There’s a silver lining in every situation, and low oil prices are not the only thing that happened in this economic downturn. The visionary realises that companies were forced to get leaner, smarter, more innovative and the stronger. We’ve seen the cream rise to the top, and the strongly-rooted, sustainable companies are weathering the storm.
It’s these innovative, and resilient companies that show promise for investment. These companies that bend with the wind, create opportunity out of adversity and re-architect themselves for a sustainable future. And let’s not forget the companies start-ups that are born out of a recession. They hold the gold because necessity is the mother of invention. And if it’s necessary it’s going to be utilised.
Right now American oil production is down, global consumption is up, and supply and demand are headed toward a much-needed balance. Given the shock wave of the downturn of the price of oil and such little investment has occurred, we can mostly likely expect a ripple effect that supports the theory that demand will exceed output in the not too distant future. If this is the case, it may be perfect timing to find the Phoenix that’s about to rise out of the ashes.
Will the price of oil stay at US $50 or will it plummet again? Experts say that it’s going to be a tumultuous road and that we should expect highs and low yet we are on a path of recovery overall. The key is to look at the long-term picture rather than act and react on the short-term lows and highs.
Don’t follow mainstream media and sensationalism, rather keep your eyes on the horizon and see the long term picture of oil recovery in the next two years.
Overall investors need a long-term view in the midst of short-term adversity. Companies worth investing in will be the ones that consistently prove earnings in tight markets like those of today and create an innovative plan for profitability in the future. Find them!
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