Oil and natural gas both have investment potential
By Dian Vujovich
Whenever I think oil, Jeb Clampett, of the popular TV show that debuted in the 1960s, The Beverly Hillbillies, comes to mind. Jeb, according to the theme’s song lyrics, was: “A poor mountaineer who barely kept his family fed, Then one day he was shootin at some food, And up through the ground came a bubblin crude. Oil that is, black gold, Texas tea….”
Today that thick tea isn’t making folks as wealthy as it did in Jeb’s day, unless ,of course, they bet on its price falling dramatically.
But before going there and talking investment opportunities, the history of oil in America is an interesting one that both launched an industry and changed how real people—not merely fictional ones– lived.
According to History.com, the oil industry turned 114 on Jan. 10. That’s the day, in 1901, when a drilling derrick near Beaumont, Texas, tapped a well that began spewing oil — about 100,000 barrels a day. It took nine days to cap that well although businessmen had been searching for oil in the region since the early 1890s.
Before the discovery of crude oil, petroleum was mainly used as a lubricant and in kerosene for lamps, according to that same source. Then, as cars, planes, trains, ships, rockets, etc., were invented, it was oil that fueled them. The result? Crude oil became the world’s first trillion-dollar industry.
Move from oil’s history into today’s investment opportunities and while you’ll hear most investment pros talking about how the price of WTI and Brent have fallen to under $50 a barrel within the past year but not many mention that 52-weeks ago prices on natural gas were nearly twice what they currently are.
On Friday, Jan.23, 2015, closing prices on oil as represented by WTI, or sweet crude oil, was $45.59 a barrel, according to Bloomberg. Brent, it represents global prices on crude oil, closed at $48.79 a barrel. And the NYMEX, the commodity futures price of natural gas, closed just shy of 3 bucks, at $2.99.
While all three have a history of extreme price volatility, money can be made no matter which direction you’ve bet on no matter which commodity you’ve chosen. That said, Robert Harvey, founder of Harvey Capital Management, reminds investors not to overlook the opportunities investing in natural gas may have.
“There are companies that drill for oil and companies that drill for gas. And as it turns out, there is as big a glut now in natural gas as there is in oil,” said Harvey.
He added that natural gas is a mainly domestic product, which could become more popular in the future because it burns cleaner than both coal and oil. Additionally, “unlike oil, natural gas is currently cheap, whereas oil is a world commodity that’s priced in the world by the world,” he said.
While no one knows when prices on oil or natural gas will move dramatically, two things are certain: At some point in time they will, and, there’s money that can be made in either.
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