No. of Recommendations: 17
of this results in a turbulent market over time as geopolitics and economics interact. It's not for those who want to avoid ups and downs. And you must learn how to manage through these ups and downs.
Inflation adjusted the cost of oil is about the same as it was after the OPEC shock of the 70’s. During that past 50 years that cost has occasionally doubled, occasionally halved. Using the retail price is fraught, because there are a lot of other steps in the value chain, but it’s reasonable to think that the cost / BBL will be somewhere in that range for the next X years.
That said, there are challenges afoot. Solar price for electricity generation has dropped by 90% since the early days, and wind is coming down too, although it’s in the middle of a rough financing patch at the moment. XOM oil is not a big player in electricity production, but makes it up on the natural gas side. Still, half the volume of refined oil ends up in car engines, and that’s decreasing - more slowly in the US than in the Nordic countries and China, but expect that trend to ramp as China exports superior EVs all over the planet.
While it’s comforting to look at the history of oil, it’s also good to remember the history of wood, and of coal, showing that nothing is forever, at least in the kinds of quantities that make XOM a global leader. I don’t think we’ll ever get to “no oil left to extract” but mostly because other technologies will obviate the need for ever growing inventories of oil. Nuclear is potentially resurgent, solar, wind, and even hydro are making gains. Oil will be around a long time, for sure, (I hope, I enjoy the dividends), but if other technologies continue to get cheaper and oil doesn’t, well…
Everybody knows Moore’s law for chips, there’s another for solar I forget the name, but it’s something like the price goes down 20% for every 20% more gross global production, or something like that. The more there is, the better it gets. We can drill baby drill, but I hope we also are looking forward, not just back to the 19th and 20th centuries as they recede in the rear view mirror.
