Oil has been falling and falling! It does not seem like it will find a support any time soon. The US Oil ETF, USO, is almost single-digit. I think it will soon need a reverse split, or else, it might lose another 30% soon. Could this mean that, before long, oil will reach $30/barrel?!
Energy paradigms are shifting around the world. Coal is already on its way out. Take a look at the coal stocks such as BTU, CNX, and JOY. How about some names that are barely trading, such as WLT, RNO, and ANR. In 2011, BTU was a $70 stock. Where is it trading now? Less than $1.5!!
While I do not think oil will fall as fast, as it will take longer for renewable energies to completely replace oil, it has already been over-drilled and the usage is about to decline faster and faster. We all know that electric and hybrid cars are becoming more and more popular. TSLA stock has skyrocketed. Will we soon see hybrid/solar planes for commercial flights?
China is making big changes in its energy policy. It has pledged to increase its total energy budget on renewable, zero-emission energy sources to 20%!
The linked article states:
"China has been also investing heavily in solar power. In 2013, it installed a record 12 gigawatts of solar power. In 2014 the country added another 12 gigawatts of solar power, reports Bloomberg News, narrowly missing its goal of 14 gigawatts."
In one year, the biggest oil companies such as XOM and CVX have lost tremendous value. XOM is down about 30% and CVX has lost more than 40%! Smaller companies are doing worse. NOV, for example, has lost more than 50% of its market cap in just one year. Even Buffet appears to be dumping oil plays, shedding the likes of PSX and NOV.
Offshore drilling stocks such as DO and RIG will likely be worthless within the next five years. RIG is already approaching single-digit.
If these energy companies were to survive, they will probably have to invest in renewable energy sources soon. This is not just about what energy sources are more economical; it is really more about the survival of our planet, and of "us". Governments around the world are already making stricter policies on carbon emissions, and they will likely get tougher in the years to come. When it comes down to our own survivor, you can bet that global governments will find ways to help make renewable energies economic enough to replace oil, if technology doesn't get us there itself.
Good night and HappyTrading! ™