With the US Government and governments around the world investing heavily in solar power Mr. BigWell founder and CEO of BigWell Oil Company LLC. better come up with a plan B.
I have little doubt that oil prices will rise. $50, $100, $200. When? I don't know; but when it does, don't get happy.
As my cat, Trygg, has said on many occasions, "There are no unintended consequences. Only unwanted consequences."
If oil prices soar,. it may be a precursor of a rapid drop in oil prices and in revenues for US companies.
If oil prices stay down,many companies in the oil industry including support services will go out of business. Fewer companies will have a larger share of the available market and may reap the benefits, but not for long. True, greater control will allow oil companies to moderate prices to avoid a push-back if not a backlash, but this is not likely. And not a long-term option.
Needless to say, higher prices generally invite new entrants into an industry. This, moderated by the high level of start up costs. However, this moderation does not apply to Oil Producing Nations globally that don't always operate entirely within the old B-School Paradigm.
Start up costs,
Cost of borrowing money
Rising demand curve,
Cost of production
Competition
Market penetration &
Market share
And so on.
In 2013 I said that Saudi Arabia will act to protect revenue. Not profits, not return on investment, but revenue. They did. They maintained production. This, to maintain market share. Remember?
Of course, I did ask this question in a previous article, "Why would US oil companies maintain or increase production with a declining global economy and the incumbent decline in demand for oil?" Indeed. What is the Oil Strategy?
The only viable strategy is to drive prices down to a level where competitors must go out of business. This creates a metaphorical tag sale for gently used oil companies and companies in support or related industries. This reminds me of the study of the Vertical Monopoly. A strategy taught in marketing class 40+ years ago.
Now, however, the same governments that ignore the B-School Paradigm that private industry must adhere to are investing in solar power and other forms of renewable energy.
As other countries develop, say, a solar power industry, any oil they have will be a strategic bargaining chip. Increase production to depress prices and create havoc on those countries that rely on oil or with little or no development of alternative energy. This, of course, creates investment opportunities.
Several years ago I wrote "Energy Independence" subtitled, "Then what?" I warned that Saudi Arabia will seek other customers. Eg. China. And when that happens, the other customers/countries will also become strategic allies in the global political and economic arena. This appears to have happened.
Emerging nations with no oil resources will be motivated to develop alternative energy. Countries with oil resources will operate at a level where they can move forward with lower prices and profits while developing a solar power industries in co-operation with other countries (China) and industrialised nations will lose the benefits of either high oil prices or low oil prices. China will continue investing Globally. In fact: Chinese Investors Arrived
This is why I wrote "OIL: The real outlook" To encourage Mr. BigWell founder and CEO of BigWell Oil Company to develop a Solar Plan B.
At the moment, Singapore and Germany are vying for the top spot on the visitor list to my blog.
The article: Emerging Nation Economic Union is the most read article for the day, the week, and the month and the second most read article of all time.
"You can't stop the arrival of history, you can only delay it. History is coming." ~Slim Fairview
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Thank you, Slim
Robert Asken
Box 33
Pen Argyl, PA 19072
Etas Unis
Warmest regards,
Slim.
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