My opinion on Oil

In current news, oil prices continue to slide.  I’ve read a lot of articles that suggest this is a long-term play by big oil companies to stop the growing number of natural gas and small competitors that are popping up all over the world (think about the growth in the Calgary area for example).  This is seriously knocking the supply and demand of energy out of whack. When the price per barrel drops below a certain threshold, it becomes very difficult for natural gas companies to be profitable and competitive.  It’s also difficult to say how long this will last, but I don’t expect it to change for at least a couple quarters (that’s just me).  My opinion is based on the idea that it’ll take some time to suffocate the small companies and see the cycle re-emerged and rebalance.  I don’t have any positions in this sector right now, but I’ll continue to watch it closely.  When you are determining the value of individual companies, or the industry as a whole, you must account for the price of oil in the future, not the past.  Using a conservative price for oil (like $50 or $60 dollars) will help you keep a margin of safety when you conduct your valuations. There is a lot of CAPEX in this industry too.