Today Oil & Gas sector is broadly considered one of the most attractive sectors to invest. I always have a critical view about mass consensus. Usually mass accepted conventions tend to be wrong. However in the case of the Oil & Gas, I am not so pessimist. The reason is simple: Peak oil theory.
“Peak oil is a theory defined by being the point in time when the maximum rate of petroleum extraction is reached. This theory derives from the fact that every oil well shows the same life cycle, since it is discovered until it peaks and then starts declining. For example the US oil production reached its peak in the 70’s. This phenomenon is derived from the Hubbert curve and has been shown to be applicable to the global rate of oil production. In defense of this theory we could point out the fact that M. King Hubbert correctly predicted that the US oil production would reach its peak between 1965 and 1970.”
The implications of this theory are huge. If we think that our industrial society depends heavily on cheap and abundant oil then we see how important oil is for our economy. The fact that it is a scarce commodity just makes it more valuable and that is why I am still very much interested in investing in oil companies.