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Blog : How to Keep Oil Prices Down
by John Whitefoot on April 11th, 2008
If you look back at press releases over the last number of months you’ll see a raft of oil & gas and stock prognosticators gallantly predicting that oil will cross the $100 a barrel threshold. And really, you don’t need to be Edward Casey to know your prediction is going to “come true”.
There’s no art to stating the obvious.
But it should be noted that the first person I’m aware of to seriously predict oil at $100 pre barrel was reporter Dan Ackman who published "Is Oil Heading for $100 a Barrel" in Forbes in the fall of 2004. Back in the day oil was trading near $53 a barrel. Naturally, his predictions caught everyone off guard. Not because anyone feared his predictions coming true, rather, most thought he was out-to-lunch.
In fact, Ackman was, in hind sight, being quite conservative, he didn’t really think oil could conceivably hit $100 a barrel for the next five or six years.
While many analysts scoffed at Ackman’s prediction, maybe we should look and see what some of those optimistic Wall Street soothsayers were forecasting for 2005.
In October 2004, Bear Stearns forecast a $25 price in 2005. Even relative "bulls" like Goldman Sachs pondered whether prices in the high $30 range might be sustained. They were clearly off the mark. Oil prices reached over $60 in August, 2005, surpass $75 in the summer of 2006, and then reach $92 in October 2007. Earlier this week oil hit an intra-day high of $112.21.
While everyone seems to have missed predicting a liquidity crisis in 2007, no one wants to be left behind with oil and gas. So, what are these same sages saying now about the future of oil and gas?
The Saxo Bank in Copenhagen, which deliberately sets out some “outrageous predictions”, suggested oil could (but probably won’t) touch $175 in late 2008. Bear Stearns has more to worry about right now than what the price of oil will be in a few months time. Goldman Sachs on the other hand has decided to follow the herd and predicts oil could hit $175 a barrel in the next few years.
No matter who you ask, high oil prices are here to stay. So, where does that leave penny stock investors interested in energy stocks? If you can’t beat them, join them. But where can penny stock investors turn to for promising junior oil and gas companies?
Might I recommend looking to the kind of oil supplier the U.S. can rely on…the kinder, gentler energy superpower to the north, otherwise known as Canada.
With the U.S. seeking to decrease its dependence on crude from unstable regions and OPEC countries, it may be a surprise for some to learn that Canada unseated Saudi Arabia as the leading supplier of crude to the U.S.; claiming the spot in 2004.
If you’re looking to park your money in trust worthy oil and gas penny stocks, there’s no where safer than Canada. While the TSX (Toronto Stock Exchange) is the seventh largest stock exchange in the world, it lists over half of the world’s oil and gas companies. And not all of them are $100 juggernauts.
Canadian Prime Minister Stephen Harper said on a 2006 visit to New York, that Canada is an “emerging energy superpower”, the “only stable and growing producer of this scarce commodity in an unstable world.”
Just because an oil and gas company is trading under $1.00 doesn’t automatically mean it’s risky. A lot of oil and gas penny stocks in Canada trade inexpensively simply because they are smaller in size (as opposed to being extreme long shots, or highly speculative).
Maybe you missed your mark getting involved in American oil and gas companies, but that doesn’t mean you missed the boat entirely. Canada is our main source for oil; they also have a stable and secure supply that they’re eager to sell to the U.S.
For penny stock investors, this could be a win-win situation.