Royal Dutch Shell plc, BP plc And The Oil Crunch

Peak oil is now reality, as BP plc (LON:BP) and Royal Dutch Shell plc (LON:RDSB) are finding out…

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In the 1990s, oil was in plentiful supply and was dirt cheap. But in the 2000s, the oil price started to increase. By the middle of this decade, the oil price had reached $100 and, suddenly from a plentiful supply of oil, people were talking about peak oil and the end of oil.

Peak oil theory says that the supply of oil increases as more and more oil is discovered, and extraction techniques improve. But, at a certain point, this supply peaks and then falls, as increasing consumption depletes these reserves and there are fewer new discoveries to be made.

Oil prices are high, but oil company profits are falling

The recent results from both BP (LSE: BP) (NYSE: BP.US) and Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) seem to confirm the peak oil view. Oil is running out faster than reserves are being discovered. Although demand is high and increasing, oil companies are finding that they can’t meet this demand as supply is diminishing. Thus we are finding that, although oil prices are high, oil company profits are falling. We are approaching an oil crunch.

Should you invest £1,000 in Ishares Public Limited Company - Ishares Euro Dividend Ucits Etf right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ishares Public Limited Company - Ishares Euro Dividend Ucits Etf made the list?

See the 6 stocks

What’s more, this effect is more pronounced for oil majors like BP and Shell. Most of the world’s oil is now being produced by national oil companies in the Middle East, Russia and Latin America. Companies such as BP and Shell are finding it increasingly difficult to find sources of oil outside of these regions, searching for oil in remote regions such as the Arctic and the depths of the oceans.

That’s why I have sold my shares in BP. I am more positive on Shell, particularly as much of its profits are actually from the booming gas industry. But even with Shell, I am considering selling.

The only oil company I am buying into

The energy industry is rapidly evolving. Increasing oil demand and decreasing supply mean that people are searching for new sources of oil. That’s why my pick in the oil sector is now Suncor, the world’s leading oil sands producer. Oil sands — once seen as too expensive and hard to extract — are suddenly now viable. This may be one of the only ways we will be able to meet future energy demand as the global car industry booms.

But this may also be the point where people move from oil to other sources of energy. There has recently been a flurry of electric car launches from car companies. The future is arriving far more quickly than we ever thought.

Should you buy Ishares Public Limited Company - Ishares Euro Dividend Ucits Etf shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Prabhat owns shares in Suncor and Royal Dutch Shell.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

£10,000 invested in Aston Martin shares at Christmas is now worth…

Aston Martin shares have fallen from above £10 in early 2020 to pennies today. Is this the perfect time for…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Up 5% in the last crazy week! Are these 2 income stocks the ultimate FTSE defensive plays?

Harvey Jones picks out two FTSE 100 dividend income stocks that have actually climbed while stock markets are heading in…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

2 beaten-down UK shares that now look really cheap

Looking for cheap shares to consider for the long term? These two British stocks offer a lot of value right…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

As stocks tank, is this a rare chance for ISA investors to get rich?

Shares have collapsed globally and valuations are becoming, on paper at least, a lot more attractive. Dr James Fox explores…

Read more »

Investing Articles

2 strong FTSE 100 dividend shares to consider as recessionary risks increase

Looking for secure passive income stocks to consider buying as thumping trade tariffs loom? Here are two FTSE 100 dividend…

Read more »

Investing Articles

Can Greggs shares offer shelter from Trump’s tariff chaos?

Greggs' shares have plummeted in recent months. But with very little exposure to the US or tariffs, could the stock…

Read more »