“For investors, the energy business used to be a pretty simple play: Buy a stock and stick with it.” Now, the game has changed says Liam Denning. Everything is far more complex. Due to the economic stumble in 2008, the energy industry has been as stable as the infamous BP oilrig.
Oil and gas producers are now suffering from the storm that ensued after the BP debacle. And, alternative energy companies are not doing any better because legislation in their favor has been stalled.
Yet, he states that the biggest problem facing the oil industry is oversupply. New techniques have allowed companies to obtain higher levels of crude and gas, but the demand of oil has gone down. Also, he says that if there is more economic trouble, then the prices of energy will fall even more causing more trouble for energy companies.
Despite the dark clouds looming above, Denning still says there is light; you just need to know where to spot it. He tells us to look for a premature cancellation of the deepwater-drilling moratorium. Some of the new technologies are more expensive than the more traditional types. If the cost of these new techniques does not go down quickly, then supply will go down and prices will go back up, thus pushing up stock prices.
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