(Newswire.net — August 20, 2015) — American financier, philanthropist and co-founder of The Carlyle Group, David Rubenstein has been quoted as saying that oil, right now, will be the best investment in the world. Stating that January was the lowest value that oil could plummet to, he believes an exponential rise in prices is coming.
In recent decades, investment portfolios have progressed beyond traditional assets such as property, shares, gold and diamonds. From passports gained through citizenship by investment to fine wine investment there are many well-performing “alternative investments”. But now, going back to basics, Rubenstein is advising that carbon-related energy assets will be one the best additions to any investor’s portfolio.
Will oil prices rise sufficiently, or should we be looking to new energy markets with a more sustainable future? Here’s a brief run down of the state of oil.
Should you invest?
There are many considerations to take into account when thinking about investing in oil. These range from whether it will actually be worth your while, to questions around the morality of investing in such a controversial industry.
Before investing, your first step should be to consult a stockbroker, or better yet, a wealth management company. Investment Quorum state that it is important to analyse your short and long term goals, your risk tolerance and your financial status. This will help determine what kind of investment may or may not be right for you.
Oil has always been on the controversial side and is often related to war and struggle in certain countries. As sustainable energies become more and more popular oil is becoming less so.
However, the demand is still huge as much of the world continues to run on oil. Therefore it seems entirely logical that Rubenstein has predicted prices will bounce back and give investors a great return. But it may not be as quick a process as he seems to think – so investors should be wary if they want a quicker return.
Where will oil prices go?
Oil prices are directly affected by the behaviour of oil trader markets. If traders believe a rise in price is imminent, they will buy up oil to sell on later at a profit. This in turn drives up the price of oil. Since the January crash in prices they have slowly risen back up from $47 a barrel to around $60.
China have one of the largest oil usage rates in the world. The economy has been growing at its slowest pace in years and thus this gives a red light to any surge upwards in oil prices.
Many big oil producers such as Libya, Iran and Nigeria continue to experience geo-political instability which would really need to settle in order for investors to be comfortable in the likelihood of a rise in oil prices.
The global economy is the biggest question
As the oil prices plummeted so too did Russia’s GDP as gas and oil are a significant source of income in their economy.
Saudi Arabia have refused to cut oil production which has hurt US production as they have been forced to drop prices. However, unlike Russia, USA’s production costs are incremental so this cut has not hurt the country much.
Iran has had sanctions lifted on some it’s oil companies by the EU and thus are expected to increase production.
Interestingly as oil prices have dropped all over the world, North Sea production is on the rise for the first time in 15 years.
The global economy is currently a very unsteady place. In all likelihood it seems that in the coming months oil prices will remain in a steady middleground. This is absolutely fine for the global economy, but promises no huge returns for investors.
But for the benefit of the world as a whole, focus should be shifted toward greener and more renewable energy sources. This applies to investors too who may wish to make their money from a more morally sound energy.