RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Kavern 23I think you'll find everything is for sale if the price is right.
At this time its unlikely the price is right.
Things need to stabilize before buyers and sellers can be expected to have equal views of the future.
Presently the price of oil has increased above the cost of production for most projects. In the past that resulted in increased production that started to come online over the next months and years.
After about 3 years, production had exceeded demand, and price declined below the cost of production. The classic repeating cyclical cycle.
There seems to be a view that it will be different this time:
Different because this time there is a belief that demand is going to disappear for good in a year or two, as renewable energy displaces oil.
That belief leads to two outcomes
1. Producers are reluctant to increase production if they think there will be no market for the oil these projects produce.
2. Investors are reluctant to buy oil/gas assets if they think there will be no demand for this oil in a few years.
This belief may correct, or it may be wrong (I think its wrong).
But - and its a big But - the belief is real.
That belief is affecting the decisions producers are making right now, in response to present high oil prices. Producers are slow to increase production when they believe there will be lower demand for oil. Some big examples, like BP are spending on wind etc, rather than big new oil developments.
It is also affecting the oil forward strip prices - ie keeping them lower than they would otherwise be. Those who think renewable energy will displace oil in 2 - 3 years, are selling oil futures today, thinking they will be worth less when they expire because no one will want the oil.
Many who trade long futures are not intending to hold to maturity, they are short term trades. They may not agree with the renewable substutution thesis, but as long as others do, they see a profit to sell to them in the short term. That strategy keeps forward strip prices low.
If the forward strip prices are low, then the current spot price doesn't matter. Its the future prices that companies use in their development decisions. IF they have been pushed lower, then production increases won't get started.
This means that until this current belief that oil demand is going to be replaced by renewable energy demand in the next 2 - 3 years is either proven false or true, there will be too much uncertainty for buyers and sellers to easily find similar valuations for their oil/gas assets.
Once upon a time, an entrepreneur, with a good idea could borrow the money they needed to implement their idea. But today, if you are an entrepreneur that thinks oil is under priced, and not going to be replaced by renewable energy in a couple of years, you can't borrow the money to do anything about it - becuase in many cases, the bankers don't share that belief.
The only people who can act on their belief that oil is not going to be replaced by renewable energy in a couple of years, are people that have their own money. In many cases, those people are already in the oil/gas sector. When the buying and selling of oil/gas properties gets going, it may be fueled by the extra cash held by oil/gas companies. That is going to take a bit of time.
For those of you like me, who think renewable energy is not going to remove oil demand in the next 2-3 years, the above belief allows us to buy something valuable for much less.