The Real Value of Oil and Natural Gas

The Real Value of Oil and Natural Gas

From an investors perspective it’s simple economics, SUPPLY and DEMAND.
Position yourself in a market where the demand outstrips the supply daily, and you can’t lose.

The world produces and uses 75 million barrels of oil per day
The United States consumes over 19 million barrels of oil per day or 26% of the worlds production
Yet the United States only produces 8 million barrels per day and must import 11 million barrels per day!

Some may call this an accident waiting to happen, others say the accident has happened and is going to get worse. We say that the timing is perfect to invest in the oil and natural gas industry and become an explorer, developer and seller of natural resources.

The United States Geological Survey calls it “The Big Rollover.” This is where we know how much natural resources we consume, we know how much we can produce and we know the rate of new discoveries is declining. Up until now its been a buyers market and somewhere between now and the year 2020 analysts predict we will see a quantum shift to a sellers market where those who own oil and natural gas wells will prosper.

“Whose fault is it? Who’s holding out? Nobody, just like the buffalo and the fish in the sea, they are just less plentiful. Same with oil, there is a limit to how much oil the world can produce every day. We are not running out of oil, it will just become more precious.”
L.B. Magoon – USGS

From an investors perspective it’s simple economics, Supply and Demand. Position yourself in a market where the demand outstrips the supply daily, and you can’t lose. “The Big Rollover” will be some ride for those not “in the know” as their everyday lives will be transformed around the cost of energy. And he who controls or owns the supply will prosper. Now, where have we heard this before?

One thing is clear; the era of cheap oil prices is over. There are new factors that affect the price of oil in today’s economy. In the past 20 years oil has been as high as US$40 a barrel and as low as US$10 per barrel. People think that the Organization of Oil Exporting Countries (OPEC) is to blame, but they only control 40% of the world’s production. But with Saudi Arabia and other Middle Eastern countries at near full production capacities the threat of terrorist attacks and financial speculation, high oil prices are here to stay.

Even though the United States consumes over a 1/4 of the worlds production there is another “Sleeping Giant” that continues to concern the world economy, China! China accounts for roughly 1/2 of the increase in world oil consumption and could quite easily shape up to be the largest consumer on the planet in years to come.

So, where to from here? Understand and accept where world oil is going and where it has been. Get yourself on the right side of the bell curve as a seller and not a buyer of this strategic and high demand commodity. Those that do will benefit the most out of rising oil prices. And finally, to own something that is real and tangible rather than numbers on a piece of paper will put you and your family in a position of strength and wealth for the years ahead and for generations to come.

By Justin Pettett
Sterling Energy
July 2004