Is There a Future in Oil?
Demand for oil keeps falling as the world economy increasingly uncouples itself from fossil fuels.
The driving forces are geopolitical considerations, technological change, rise of renewable energy sources, as well as growing health and climate protection concerns.
Against this, we anticipate that traditional oil companies‘ business model will be increasingly challenged.
The oil price crash was primarily triggered by oversupply in oil. But what would happen if also demand started falling structurally, for example driven by more restrictive climate protection measures as recently agreed on in Paris? Or a world-wide boom in electric vehicles triggered by affordable prices, increasing mileage range and fast-charging batteries. Some analysts predict that electric cars will make up to 50% of market share among newly sold vehicles by 2040.
Although no one can know for sure how quickly this new market will develop, resulting consequences for oil companies are obvious. More electric cars on the roads or an extensive decarbonisation of the world economy will cause havoc on the oil industry. Billions in investment and oil reserves – currently reported as assets in corporate balance Sheets - would have to be written off.
Large institutional investors such as global insurance companies, banks and pension funds have already started clearing their portfolios from potentially stranded assets by selling off coal stocks. We believe that oil stocks could follow suit. Interesting enough, even large oil companies themselves have started partially divesting their oil reserves. These exits taking place at seemingly depressed oil price levels should render investors suspicious.
The future belongs to innovative companies whose new technologies and business models enable a world without reliance on fossil fuels. This in turn offers attractive investment opportunities in the area of energy saving technologies, e-mobility, sharing economy and renewable energy projects, to name a few.
Is your investment portfolio exposed to energy risks?
Consult our Portfolio Simulator for an immediate response:
Build a portfolio by choosing from the following four stock baskets.
Our simulator will display risks, opportunites and returns of your custom-built portfolio.
- 1 Define
- 2 Start
- 3 Compare
Stocks Oil and Gas
- Total SA
- Consol Energy
- Natural Resources Partners
- Rio Tinto
Stocks Energy Transition
- Schneider Electric
Stocks Future Movers
- Vestas Wind
First choose your share.
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