That’s a question I’ve been asking my readers lately. Considering the markets are closed today, I felt it was a good time to reflect a little more on the subject. You would be absolutely shocked at how many investors I’ve come across that didn’t have an answer.
More disheartening than that is how little the energy markets are understood. I’ve actually met oil investors who had no idea how much oil the world is currently producing. Needless to say, that ruined any ensuing conversations on decline rates, production constraints and where oil prices were heading over the next two years.
More Questions, No Answers
The one thing that stands out most in the oil markets today is the shade of gray surrounding production, reserves and (more importantly) what the future will bring.
While I’m on the topic of shadiness, I might as well bring up OPEC. For a group that controls approximately 40% of our world’s oil reserves, we really don’t know much more than what we’re told. And when you look at their past, I can’t help questioning their truthfulness.
Until OPEC members decide to disclose their oil field numbers (which are a close-guarded state secret), the only thing we do is speculate. Yet even if members suddenly released their numbers, I’d still have considerable skepticism. One of my favorite tables of all-time is the sudden increase in OPEC reserves between 1983 and 1990.
I have repeatedly called shenanigans on OPEC’s oil reserves. Watching a country double its reserves practically overnight is too much. In the case of Iraq, that ridiculous increase happened twice in a five-year period.
Do you really understand what’s going on? Be honest.
The average investor has no clue what’s happening. That isn’t a jab at anyone, but rather another reason why understanding the situation is that much more important.
Unfortunately, the problem extends further than OPEC’s shady dealings.
Can you remember how many price forecast changes you saw in 2008? Every week brought a new round of predictions, each trying to push the limit.
Protecting Your Investments
It makes me wonder how many investors truly understand the oil markets. Sadly, I believe there’s a plethora of investors swinging blindly for the fences. They aren’t able to take their investments to the next level.
The problem is the lack of due diligence. Whether it’s an investor not doing their homework on a particular stock, or even assessing a particular sector, it’s only a matter of time before the money is lost.
Again, the question comes down to whom you can trust.
Putting the Pieces Together
No matter how you approach your investments, the only person you can always trust is yourself.
Think about it. If you’re making blind investment decisions based with no forethought of where things are headed, you’re in danger. There’s no other way to put it.
I’ll be the first person to tell a reader that due diligence is the single most important factor when you’re even considering the thought of investing even a dime of your money.
That statement holds even more weight in today’s market. Two years ago, it felt like all one had to do was put a list of oil companies on a board and simply start to throw darts, picking up whatever it landed on.
Finding that information can be difficult, especially when you don’t have hours upon hours per day to spend researching. I can’t begin to tell you how many investors I’ve met that have failed to advance their positions because they didn’t understand the world’s energy problems. Sometimes that position is juxtaposed. I’ve heard from readers that have spent decades researching the science and theories behind our energy crisis, yet couldn’t take their investments to the next level.
Then again, I would be remiss to my readers if I couldn’t offer some help. Below, you’ll find your answer. If you’re looking to invest in the next energy boom and need a place to start, you won’t find a better opportunity.
Until next time,
P.S. Is your portfolio ready? Gain market intelligence from leading industry experts, including Dr. Robert Hirsch, Charles T. Maxwell and Matthew R. Simmons.
Learn factors affecting energy prices including inventory and production constraints, supply trends and geology, import-export issues, technological innovation, and how to read the futures market. Learn how to buy energy infrastructure assets, long term oil reserves, and energy alternatives including clean technology stocks at private equity type returns.