Is Big Oil truly ready to take on what the future holds?
One of the big questions coming out of last week's comments from an international ExxonMobile (XOM) exec was the fact that oil is lumped in a rather slow-growing sector with coal and natural gas. We're talking about 1.6% annual yearly growth as compared to the growth of wind and solar power, which is projected by this Exxon exec (Robert Olsen) to grow at 10.5% combined. But he still insists that fossil fuels, including the wares offered by Big Oil, will be meeting energy needs, and that 80% of energy needs will be met by Big Oil and other fossil fuels. The guys over at Motley Fool, however, are not so sure:
[M]any of today's big fields were discovered decades ago, and their production rates are beginning to flag seriously. As such, the future discoveries that would accomplish the big hike in output must first make up for that sliding production.
And this means that maybe Big Oil won't be so big after a while.
Add this to the fact that stability isn't something that countries with oil are known for. From Venezuela to Nigeria, instability seems the norm, and in many cases, hostile governments are in charge. As supply diminishes and instability continues, the price of oil will only go up. Not only will this eat into Big Oil profits, but it will also mean price increases on the consumer end. How high will they have to go before we start demanding alternative energy? And if alternative energy does truly take off and grow at its forecasted rate, will it end up being more profitable than Big Oil companies like ConocoPhillips (COP), Royal Dutch Shell (RDS-A), BP (BP) and Chevron (CVX)?
Disclosure: The only Big Oil stock I own is BP.