In the recent past, investors have talked about their bullish views on asset classes like gold, silver and cryptocurrency.
However, it seems that "Black Gold" still has a dominantly bearish view. I would take a contrarian approach and I am bullish on Oil (Black Gold).
Let's discuss one big reason to be bullish on oil.
The United States, which has a population of 330 million, has an annual per capita consumption of 934.3 gallons of oil.
China, which has a population of 1.3 billion, has an annual per capital consumption of 138.7 gallons of oil.
India, which has a population of 1.2 billion, has an annual per capita consumption of 51.4 gallons of oil.
Forget about China and India reaching per capita consumption of 934.3 gallons of oil. Even if a population 2.5 billion (China and India), reach a per capita consumption of 300 gallons of oil in the next decade, the demand for oil will be significant.
Therefore, with sustained growth in demand likely, I am bullish on oil. Another factor that makes me bullish on black gold is geo-political tensions. The conflicts in the Middle-East are far from over. Any escalation in tensions would make oil price go ballistic.
It's also worth noting that the dollar is likely to weaken in the coming decade. A weak dollar will be positive for oil and commodities.
In terms of investment and exposure to oil, investors can look at fundamentally strong oil exploration and production companies. I had discussed one company in Leo Finance. Investors can find the article on Chevron Corporation here.
In the near-term, oil is likely to remain depressed as the coronavirus pandemic continues to impact GDP growth. I believe that it's a good time to gradually accumulate quality companies in the oil and gas sector.
Posted Using LeoFinance Beta
My caution against being a bull on oil is that technology is changing fast. Electric cars are not just a fad. It is hard to imagine a time when we wouldn't need oil, but it used to be hard to imagine a time when you didn't get your photos developed. Film companies went fast when the demand went away. It could change repetitively quickly and may already have started.
Posted Using LeoFinance Beta
Indeed, we have electric cars and we have several sources of renewable energy. However, I believe that the transition is likely to be gradual.
To put things into perspective, China is the largest market for electric vehicles. Currently, 5% of new cars sold are electric vehicles.
The government is targeting to increase this to 20% by 2025. So change is coming. But it will take time.
And oil might not go back to $100. But even if oil is in the range of $60 to $70, there are lot of exploration and production companies that will generate robust free cash flows.
Posted Using LeoFinance Beta
You should take into account car manufacturers producing more and more electric vehicles, the tech getting better and ranges getting higher, while customers being incentivized to switch in larger numbers towards EVs, especially in urban areas.
Posted Using LeoFinance Beta
Good call. What do you need to make electric cars & trucks, wind, solar, and hydro energy? Oil. The only real competiton I see oil having is nuclear energy. Society doesn't seem eager to go that route yet.
"Grease is the way we are feeling. Grease is the word".
Posted Using LeoFinance Beta
Thanks for making this point.
Oil and natural gas will remain primary sources of energy.
For that matter, even natural gas is attractive from an investment perspective.
Posted Using LeoFinance Beta
We may be able to ditch our dependence on oil sooner than we think. I actually hope that innovation makes that possible sooner than later. Still, I moved heavy machinery for years of my life. I've seen the industry in action.
Posted Using LeoFinance Beta
I am glad I have passed by your articles and I totally agree with you on the black gold. Using the information that you've provided I've bought into CHEVRON (CVX) and already gained quite a bit on it. I anticipate that once the pandemic cools off, it will rise as never before.
Posted Using LeoFinance Beta
I am glad that you are in profits.
Yes, I do expect more upside in Chevron in the coming quarters.
It's a quality stock and worth holding for dividends as well as capital gains.
Posted Using LeoFinance Beta
I'm with you, I think oil has bottomed and the greatest thing benefiting oil is a weaker dollar.
Posted Using LeoFinance Beta