CurrentAffairs : Russia - the new oil Czar
Its important to chew on this piece of news a bit, since it looks like this means that in the medium to the long term, the AVERAGE price of crude will not climb to "unaffordable" prices, just yet. Analysts of crude prices have long since been divided into two camps. One believing that crude being perishable resource, is bound to face a glut some time between 2020 to 2040 and from then on the prices would reach stratospheric levels. The other camp has always held that crude supplies have never been fully explored and there are large tracts of the world, where crude can be and will be exploited going ahead. They contend that this means that the price of crude would rise, but adjusted for inflation, it will not rise to "stratospheric" levels and therefore would continue to remain the primary source of fuel, for at least the foreseeable century or two.
In the past decade or so, it is the latter camp which seems to be scoring over the former, despite the short term spike in crude we witnessed in the last six months or so (when crude came perilously close to $80 levels, before climbing down to sub -60 levels now). At the same time, its a fact that oil suppliers are much more diversified now, from
What does it mean for you and me? Well, if you are an equity investor, its time to sell ONGC (an oil producer) and buy the oil retailers (HPCL, BPCL). Although, one must bear in mind that oil will continue to be volatile and therefore one has to be prepared to ride these difficult horses along with that. Also buy Auto stocks and auto ancillaries, which depend on oil staying where it is or just tracing the inflation rate.
And if you are planning to buy a new car, go ahead. Don't worry about the oil price moving beyond Rs. 100-150/litre just yet.
So far at least, oil's well that ends well.