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Martin Tillier

Martin Tillier

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Will It Be A Happy New Year For Energy Investors?

It has, to say the least, been an interesting year for energy investors. 2014 started with everything looking rosy. The global recovery was in full swing, the price of oil and gas was fairly stable and climbing, and the “energy revolution” in the U.S. was in full swing. Unconventional drilling (primarily hydraulic fracturing, or fracking) had opened up huge reserves of oil and gas in the U.S. and elsewhere that were just beginning to come on line. Even alternatives were looking good at the start of the year, with solar companies in particular finally beginning to turn potential into profit. By the end of the year, though, everything had changed.

As I pointed out in the very first piece I wrote here, oil prices could not keep going up. The increasing supply was outpacing demand increases, in oil particularly, and economics 101 suggested that a correction would have to come. What neither I nor seemingly anybody else anticipated was how severe that would be. A strong Dollar and evidence of slowing growth in Europe and emerging markets, particularly in China, combined with that supply and demand imbalance to produce what can only be called a collapse in the second half of the year.

Anything even vaguely related to energy went with the oil price. Stocks tumbled, with the small companies with exposure to expensive shale and deepwater plays hit hardest. The question for investors, of course, is how low can we go? There is no logical, chart based support for WTI…




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