John Rubino's Substack

John Rubino's Substack

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John Rubino's Substack
John Rubino's Substack
Let's Add Some Oil Stocks To The Portfolio

Let's Add Some Oil Stocks To The Portfolio

Oil is a real (not financial) asset, and some good producers are very cheap

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John Rubino
Apr 01, 2023
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John Rubino's Substack
John Rubino's Substack
Let's Add Some Oil Stocks To The Portfolio
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Oil peaked at $120 a barrel in mid-2022 and since then is down by about 40%.

For oil company stocks, the current setup is interesting:

Governments have begun mandating that electric cars replace internal combustion engine vehicles by 2035 or thereabouts. The oil industry took these demands seriously and scaled back its exploration, which means oil supplies will be constrained for at least another decade.

But now it’s becoming clear that these “all-electric” timelines are wishful thinking, soon to hit the brick wall of cobalt, nickel, and copper supply shortages. So the age of internal combustion engines — and by extension fossil fuels — isn’t ending after all. The result: reasonably strong prices and good profits for the oil companies that own low-cost reserves in stable places.

Meanwhile, thanks to the recent drop in oil prices, stocks in this sector are pretty cheap. On the following screenshot from a MarketBeat page of industry leaders, note the massive market caps and ridiculously low P/E ratios. Most of these guys also pay good dividends.

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