Explaining the Crude Oil Market

Allied Resource Partners is in business to make money for our investors by finding, drilling, and producing oil and gas.  We don’t claim to be “smart enough” to predict what the market is going to do; no one is.  But we do know enough to realize that oil is going to be a big part of energy demand for the rest of this century.

And how do we know this?  We study market, industry, and sociopolitical trends well enough to make sense out of what we read and hear.  And we’d like to summarize for accredited investors and partners alike what we see for oil and gas, using some of the concepts presented by respected authors.  In particular, we’ll borrow from Jared Diamond’s recent book, Upheaval, and Joshua Cooper Ramo’s The Seventh Sense.

Diamond describes what steps to take to handle a crisis or an opportunity, be it at a personal, company, or national level. Ramo’s book explains that today, we must “network” in order to deal with an often chaotic and increasingly complex world. We have synthesized them to offer the following insights into the crude oil market.

What do we see happening today?  Spot prices fluctuating due to politics and speculation, not due to supply/demand shifts.  LNG tanker fleets expanding. Russia exercising discipline in OPEC.  China locking in energy supplies.  Third-world populations growing while developed-world populations not.  Developed-world pushing for renewable energy while third-world not.  Let’s try to explain.

Yes, there is an “energy crisis,” but it has been with us since the 1970’s. It is a long-term crisis for which solutions are known.  But let’s face the facts:

  • Third-world population growth is driving demand and will for the remainder of the 21st
  • Conservation, electric vehicles, and renewable energy will have only a marginal impact, even in the developed world.
  • China’s “Belt and Road Initiative” will continue to challenge America for economic world leadership as it forges alliances among ASEAN, India, and Africa.
  • Natural gas and LNG tankers will become increasingly important as the global energy market seeks more trustworthy suppliers than Russia or the Middle East.
  • The Domestic Oil Patch, thanks to American technological innovation, will continue being a major source.
  • “Stop and Go/Boom and Bust” mentality never works. That’s why marginal players fail.

So, how does Allied Resource Partners turn this to our and our partners’ advantage?  By “leading the way” with an approach for building our business and treating our partners the way they deserve.

  1. We are in business for the long term and plan to make money for ourselves and our partners in all phases of industry cycles.
  2. We have an efficient business model that finds and produces oil and gas by networking with a cadre of the best vendors and consultants available.
  3. We share what we know with our partners, explain our projects thoroughly, and price them fairly and honestly.
  4. We understand what is driving the market and look for opportunities that others can’t find.
  5. We have a talented core team whose entrepreneurial spirit always keeps us pushing ahead, never resting on past accomplishments.

We recommend you read the books mentioned above for additional insights into dealing with the way the crude oil market as well as the Modern World works.  And if you do, you’ll come across other criteria we are using to “lead the way” for what smart investors want today from oil and gas investments.

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