cheap oil
Just like everyone thought oil was going to stay at $100, most people now think oil is going to stay 50-60. I would just like to run through a few reasons why cheap oil IS NOT a medium/long term concern. Please feel free to add any comments
1) Cheap oil reduces the incentives to switch to renewable energy. With massive investment taking place in this space, it would make sense that there needs to be a balancing of interests in this regard. Oil companies would rather make money on low volume than pump at a loss.
2) India has yet to experience rapid industrialization and growth. Many are concerned about China's growth rate, but based on the fundamentals of the Indian economy, there is a substantial amount of catch-up growth that is presently being discounted. This will surely add to demand
3) Supply has grown faster than needed given the high price of oil. This oscillation should normalize around 75$ in the short/medium term. From this point, there should be less volatility as the price allows for supply growth to match demand growth
4) Speculation and greed has driven this down beyond reason. As noted previously, drilling has begun to slow up and this will be felt across the world in unconventional oil plays. This will have a drastic effect on supply in the short/medium term. Demand, all the while, will continue to creep up. The economies of scale for green energy has not penetrated the transportation industry and is still approximately 10 years off. Management of oil fields should be more prudent, as a drill-all-at-once mentality has led to the recent collapse. With massive amounts of money at stake, drastic changes are already being implemented to firm up the price of oil.
Surge is a undervalued oil play that will recover to 5-6$ once there is a sense of stability regarding the price of oil. The ascent of the SP should take place as oil creeps back up towards $60. There is no reason, given today's technology, that oil shouldn't be priced higher. With population/supply projections, this oversupply is a momentary blip that was caused from lack of coordination. Now that the shale plays have a better understanding of who they are playing with (RE: OPEC), you will see a more prudent approach to supply.
These are just some musings - feel free to chime in.