BP for VP?

[PP67]

As a petroleum engineer nearing retirement (maybe sooner than I would chose), I have been taking more than a passing interest in the falling oil prices of late.  It strikes me that unlike say gold, oil is currently a necessary global consumable commodity which cannot be replaced at near the current price levels.  All major oil producing entities are producing at unsustainable prices to maintain their viability, either as a nation or a corporation.  Therefore, barring some technological breakthroughs in the energy realm, I believe it follows that the price of oil will have to invariably rise in the near-to-mid term to a level where the major suppliers are making a profit.  I don't know what that level is but I think I read somewhere that the Saudis were shooting for $50-$60/bbl which would keep the shale players out but make their budgets manageable.
 
Would it make sense to put some VP money now into some of the major oil producers (Exxon, Chevron, Shell and BP) that are currently down an average of 24% for the last 12 months rather than say real estate?  Or is there other ways to bet on the future price of oil more directly (although I bet much more risky)?

Any insights would be appreciated!

[Jack Jones]

http://www.bloomberg.com/news/articles/ ... tom-in-oil

[ochotona]

Better idea than BP buy a big energy index ETF like xle but only when it exceeds the 200 day moving average.

[Reub]

I remember hearing recently that in the latest domestic Saudi budget they were predicating their decisions on $29 oil for this year. If so then we are just about there. And who would know better than the country that is driving the price?

Maybe it's a good time to slowly start accumulating oil company stock.. Who knows? But I would stick to rock solid companies preferably paying decent dividends.

[var]

As a petroleum engineer nearing retirement (maybe sooner than I would chose), I have been taking more than a passing interest in the falling oil prices of late.  It strikes me that unlike say gold, oil is currently a necessary global consumable commodity which cannot be replaced at near the current price levels.  All major oil producing entities are producing at unsustainable prices to maintain their viability, either as a nation or a corporation.  Therefore, barring some technological breakthroughs in the energy realm, I believe it follows that the price of oil will have to invariably rise in the near-to-mid term to a level where the major suppliers are making a profit.  I don't know what that level is but I think I read somewhere that the Saudis were shooting for $50-$60/bbl which would keep the shale players out but make their budgets manageable.
 
Would it make sense to put some VP money now into some of the major oil producers (Exxon, Chevron, Shell and BP) that are currently down an average of 24% for the last 12 months rather than say real estate?  Or is there other ways to bet on the future price of oil more directly (although I bet much more risky)?

Any insights would be appreciated!

if your in the oil industry and you know something about it.
xom its got a good track record and a 3% dividend.

its retraced about 60% of its high... its got strong support at 68.

if your in for the long haul, it might be a good choice... at some oil going to be up... but i am not in that industry...

[ochotona]

It dismays me that people here in Houston in upstream E&P like me cannot think beyond oil. We are like abused women who cannot leave a bully partner with hungry fists.

[MWKXJ]

You might look into PEO as well.  Been around since 1929 and currently trades at a 16% discount.  The discount, however, has been persistent and a decade ago stood at ~8%, but a sudden reversal of fortunes in the energy sector could cause it to narrow.  Fees, at 0.63%, are good for a CEF but a middle of the road for an ETF.

It strikes me that unlike say gold, oil is currently a necessary global consumable commodity which cannot be replaced at near the current price levels.

I'm with you here.  It boggles the mind just how many things are made of oil.  Chances are if you're standing by a window you'll see an asphalt road stretching somewhere out of view, perhaps over the horizon, like a small strand of a massive fisher's net encompassing the entire hemisphere.  If you wait a moment you'll see a car trundle by on its tires made styrene-butadiene rubber (oil) and chances are that most of the rest of the car will be made of oil-based plastics as well.  Home siding, asphalt shingles, the paint on houses, modern plumbing, not to mention countless items within the average home which are made of oil, point to a dependence that will survive the current over-abundance, and indeed, cause a future shortage.

[Pointedstick]

A future shortage would probably cause us to use more wood, metal, and masonry for stuff, which IMHO is for the best long-term. Certainly thermosetting polymers will seem like utter madness.

[barrett]

Does anyone know what kind of weighting oil companies currently have in the S&P 500 index?

In the category of "you just can't predict the future" it just blows my mind that we are seeing oil at $30 per barrel.

[ochotona]

Does anyone know what kind of weighting oil companies currently have in the S&P 500 index?

In the category of "you just can't predict the future" it just blows my mind that we are seeing oil at $30 per barrel.

Around 12% or so