Listen up, Texas! Experts say, now is the time to buy.
Forbes, the esteemed financial-focused magazine, is telling readers and anyone really with some savings to invest in oil. Now is the time.
As the price of oil has plunged from $100 a barrel to $30, gasoline has gotten cheap. At $2 a gallon, you can now fuel the average car for about $1,000 a year. No wonder SUV sales have surged. But the cheap gas won’t last–oil companies can’t make any money at these prices. Even Saudi Arabia is feeling enough pain that it’s considering an IPO of Saudi Aramco. Don’t think for a second the oil industry is in some kind of death spiral. Global supply, at 95.5 million barrels per day, has never been higher.
Neither has demand, at 94 million bpd and growing. Despite the handwringing of the anticarbon agonistes, we’ll still be using oil for a long time. In a couple of years or less demand will catch up with supply, oil prices will return to sustainable levels and $2 gas will be history. You can effectively lock in your cheap fuel supply by buying oil now. Though you probably aren’t in the position to buy oilfields outright, like Trevor Rees-Jones, shares of oil and gas producers are selling at deep discounts.
Among the top picks of Morningstar MORN +0.74% analyst David Meats is Cabot Oil & Gas, which like Rees-Jones’ Chief Oil & Gas holds a large position in the juiciest part of the Marcellus shale. He also likes Continental Resources CLR -4.03%, which is focused on the Bakken. Analyst Bob Brackett at Sanford C. Bernstein likes EOG Resources EOG -5.29%, which holds the best position in the Eagle Ford shale. Also Anadarko Petroleum, which is in many of the best shale fields. A more diversified way to go is the Vanguard Energy Fund. Top holdings include Exxon Mobil XOM -1.85%, Chevron, Pioneer Natural Resources, EOG and Royal Dutch Shell . The no-load fund’s expense ratio is just 37 basis points. There may still be some hard months ahead for oil and gas, but if you add to your investment every week for the next few months, you might just catch the bottom. As oil and gasoline prices rise, producer profits will surge–proceeds that will help fill up your ride for years to come.