Are the Canadian Oil Sands the best investment opportunity of our lifetime? When you consider the possibility of wars in the Middle East and government intervention across the globe (as well as disasters like the BP oil spill), they just might be! We’ve been discussing asset management in a crazy economy. In the last 3 posts of this series, we’ve looked at the advantages and disadvantages of oil and other energy investing. Today, we’ll look at these factors mentioned above.
Government, Disasters, & Wars
Like any other investment, there are characteristics particular to oil investing. In the oil industry…
1) Governments are constantly changing regulation and most of the world’s oil seems to be held in some of the least desirable government controlled locations.
2) An oil spill, explosion, or other disaster can be very damaging to the environment, people, and by extension shareholder value. Any company to whom this happens to can be hit very hard. For example, a company whose main activity is drilling in the Gulf of Mexico can see business obliterated if the US Government bans offshore drilling.
3) Wars (particularly in the Middle East) can push oil prices significantly higher, but can also be damaging to companies if they operate in large part in that area.
The Canadian Oil Sands
It’s interesting that the places in the world which seem to have the most oil, also seem to have the most instability. The Middle East is constantly in and out of war. Many other countries which have oil also seem to have unrest. Nigeria has it’s rebel groups. Venezuela has Chavez whose communism is destroying that country. Many other major oil companies around the world are either partially or wholly government owned. This leads to terrible management. Mexico and Venezuela are both examples of this. The profits are used for government projects instead of investing back into the business and thus the companies and their oil production declines.
Add all this together and combine it with the fact that one of the greatest growth stories in the oil industry is happening in Canada, and you have an explosive opportunity. The Canadian oil sands is one of the largest deposits of oil on the planet. The problem with them is that this heavy oil is found in sand and so the cost of drilling/mining is more expensive than traditional West Texas Light Sweet Crude. It generally costs about $40/barrel to bring to market. (Exxon Mobile is the lowest cost producer at under $20/barrel.) This means that when oil prices were at $40/barrel only a couple years ago, it was impossible for these companies to make a profit. However, at $80/barrel, they can make a very nice profit. When the price is over $100/barrel, they really sing! If you believe in the global demand story for oil and particularly if you believe that continued war and government mal-investment across the world will cause higher prices, then these Canadian oil sands could be the ticket to large profits.
The same can be said for the massive development in the Eagle Ford in South Texas where new technologies have made it possible to produce enormous amounts of oil in what was previously a passed over oil field.
Factors such as these should be considered when investing or speculating in oil related investments. We’ll look at gas and coal next. If you have any thoughts or questions on this or other topics, please let us know.
is a Stock Market Crash coming soon? Here are the signs… the world economy is teetering on the edge of another crash. This will include a stock market crash which directly affects most of us directly, but it will also be in many other areas. If you missed the first economic update video in this series you can view it here. Many of you will have missed it because I coded Monday’s blog post incorrectly. I’m sorry for the mistake and the inconvenience to you!
Today’s video focuses on the biggest news items of the last 6 weeks which relate to the coming stock market crash, real estate problems and other economic indicators showing that our economy is taking a giant turn for the worse. Because it was about 6 weeks since my last report, I’m sticking to what I feel like are the biggest news items in both this video.
As you’ll see, there have been some major harbingers of trouble for the US economy (like a stock market crash coming soon). I hope you enjoy this video and that it helps you prepare…
Gold & the US Dollar, what’s changed? Much has happened in the last 6 weeks that affects both gold & the Dollar. It’s taken me a while to get back to making economic update videos since the birth of Westin. But now I’m back. This video focuses on the biggest news items which relate to the US Dollar and to gold. Because it was about 6 weeks since my last report, I’m sticking to what I feel like are the biggest news items in both this video and the next one which will come out soon.
As you’ll see, there have been some major harbingers of trouble for the US Dollar as well as some incredible signs of new demand for gold. I hope you enjoy this video…
Does the Bible speak of oil being found in Israel? Should you invest towards that end? I have no idea, but twice in the last week someone has suggested this idea to me, so I thought I would pass it along to you since we are on the subject of oil.
Here is a link to some videos and stories on oil companies in Israel. As with any investment, you should ideally only invest if you both understand it and feel like it’s within the stewardship calling the Lord is leading you in. Obviously, if the Lord spoke unmistakably to you about investing in a certain way, you should follow His voice.
As for us, we are not geologists and so we have no opinion on how economic the oil deposits are that these companies have found (and therefore have no idea whether or not one of these companies will be a good investment), but we did find it all very interesting and thought it would be fun to share with you on a Friday! Have a blessed weekend!
Oil is the most contested resource in the world. World production has not been growing at nearly the rate that world consumption has been. We’ve been discussing aspects of energy investing.
As we’ve stated previously, the world is consuming more and more oil all the time while new supplies are not able to keep up. While politicians love to talk about alternative energy, the fact that we rely on oil as our main source of energy cannot possibly change anytime soon. It is easier to imagine a world where economic activity drops severely and far less energy is used in total, than it is that our entire system of technology will magically shift to another source within a decade.
We feel like there are four main factors to consider in oil investing: [click to continue…]
Oil, like most any form of energy that we will be looking at, is a commodity product. There might be two benefits in this for you. We’ve started discussing energy recently. Today, we look at the commodity advantages of oil. [click to continue…]
Oil, gas, and clean energy are some of the many ways we power our modern
Sources of Energy
lives. We’ve been discussing asset management in a crazy economy. Today, we’ll being to look at oil, gas, clean energy, and other forms which you can invest in.
Energy is a basic key to life in the modern world and the overall economy in general. Consider the fact that the world population is growing at a staggering rate and that the countries with the largest populations have just begun to leave the agrarian lifestyle they have lived for thousands of years and have become energy consumers. Now add to this the understanding that the world is not producing or finding new sources of energy at anywhere near the rate of usage growth. Together, this is a very combustible situation. [click to continue…]
We’ve been discussing gold and silver miners. Today, we’ll wrap up this 3 part discussion. Part two is here.
Leverage Gold ETF
Gold and Silver investing can be turbocharged for greater profit (or loss). We’ve been discussing asset management in a crazy economy. Today we’ll look at the use of leverage in gold and silver investing. [click to continue…]
If you’re invested in a particular gold or silver mining company (as opposed to a diversified holding such as an ETF or mutual fund), then you have the risk that something goes wrong with that companies holdings (along with the potential reward that things go fantastic with its holdings). We’ve been discussing gold & silver mining company investing. Today we look at the different types of Miners you can invest with and the advantages of each… [click to continue…]
Today…some housekeeping. First a couple words about what’s going on with the blog…and then I seemed to have rambled into some thoughts on the market and even some baby news…. [click to continue…]
