As the stock market tumbles for yet another day, Big Oil stocks find themselves hard hit. Indeed, energy investments, from Big Oil companies like Exxon (XOM) and Chevron (CVX) to the Amex Natural Gas Index (XNG) to alternative energy like First Solar (FSLR) are suffering massive losses as the hemoraging continues. Oil companies, especially, are feeling the pinch.
Not only are stock prices dropping with the rest of the market, but crude oil prices are dropping rather dramatically — even dipping below $80 a barrel at one point. This makes for smaller profits on the upstream end of things for Big Oil. Another issue that is plaguing oil companies is the economy. With the economy failing, many people are cutting back, and this means that demand for oil is weakening, driving prices down.
Perhaps a bigger factor, though, is the slowing of emerging market economies. While upcoming economic powerhouses like China and India (and even Brazil to some extent) are suffering from the onset of a global recession, those countries’ demand for oil is drying up as well. While the long-term outlook for demand probably remains strong, the timetable has been pushed further into the future by the current economic situation.
So what to do? Well, it depends on your risk tolerance and your investment plan, as well as your time horizon. I’m bargain hunting today. And staying put with my Roth IRA.
Disclosure: I do not invest in Big Oil. I am considering FSLR.