The future value or expected value of crude oil is expected to remain high. The price of a barrel has been as high as $146 in July of 2008, but is expected to hold more of a conservative estimate at $70 to $80 per barrel for the next three years. Due to this expected retention or stability in price level major global oil companies are beginning to invest at increased rates to expand production. Essentially, there is a belief that the usually volatile oil market will remain relatively stabilized leading to increased investment in exploration and production.
Several big name companies that are seen in this new trend of investment are Exxon Mobil Corp., XTO Energy Inc., and recently Chevron Corp. Each of these companies have begun to build up excess liquidity in an effort to expand into growing oil production. Even BHP Corp. is expected to increase its holdings in research and development. Basically, all the major players in the oil industry have shifted their investment outlook to increased expansion and production. This move was made in an attempt to keep the relative stability of the oil industry constant for the coming years.
What does this mean for the energy industry you may be asking yourself. Simply, there has been a shift in the trend of investment. Regardless of recent economic turmoil there seems to be a new perspective on investment. The major oil companies believe that the recent stability in the financial system will give them the opportunity to secure their investment projects. Oil companies are the first major players to begin re-investing in expansion and exploratory projects. Now it is only a matter of time before other lagging parts of the energy industry begin to re-invest in expansion.
- By: Timothy D. Vallario
- Source: Wednesday, November 17, 2010 - VOL. CCLVI NO. 118, B9A - "Oil Companies to Spend More Money", By Isabel Ordonez
This is an interesting article, although I'm not quite sure I understand it all. If oil companies are investing money in production, will this make the price of oil per barrel higher or lower? Or, will it remain constant, as the article said it had over the last few years. It did make sense what you said what it would do to the whole industry. I wonder what this expansion and these exploratory projects will be. I also wonder what you mean when you say other lagging parts of the the energy industry. I think it will be interesting to see these investments' effects over time.
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