Energy price forecasts that seemed to be on a prolonged rampant upswing have taken one heck of a U-turn. Take Goldman Sachs
As recently as May, the company noted an expectation that global crude prices could reach $150 to $200 over a 6- to 24-month period. By last month, the firm had "settled" on a $110 average price for next year. But now, with prices having dropped by a whopping 50% just since July, it's cut its forecast for the year-end U.S. crude price to $70, down from its previous expectation of $115. Beyond that, it says that the $50 level is possible should the current credit and financial crises continue.
If that series of prognostications strikes you a little like driving by looking in the rearview mirror, you may have a point. But from my perspective, it flies in the face of predictions from energy seers like ExxonMobil
Admittedly, lots can happen between 2009 and 2030 (including a special price-cutting OPEC meeting next month), but it's also inescapable that we're still paying today for the crude price declines in the 1980s, which resulted in a severe reduction in infrastructure spending and a decline in the numbers of students studying petroleum engineering, geology, and other energy-related curricula.
And while lower crude prices and more reasonable gasoline prices at the pump may please you -- and they should -- keep in mind that a too-severe decline in energy levels could have dire consequences down the road:
- As the major importer of crude into the U.S., Canada’s oil sands development could be hindered.
- Development of energy assets in places like Russia and Kasakhstan could be curtailed.
- Development of the big new discoveries offshore Brazil likely could be slowed.
- Work on alternative energy forms could be marginalized, putting us in the soup as the world's thirst for energy ramps up.
These trends -- along with the precipitous declines in energy shares during the past few weeks -- signal a tremendous (and renewed) opportunity for investors in the energy sector. I'm inclined to point to the likes of Devon
Of the energy names mentioned above, Devon, Weatherford, and Diamond Offshore all sport a full five stars as awarded by Motley Fool CAPS members. Do those rankings include your votes?
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