By: Bill & Cindi Porter, Aileron Investment Advisors
Q: Should my portfolio include investments in the oil industry?
A: We think oil and related investments such as oil and natural gas pipelines and storage tanks are a good long-term investment. Last month in Atlanta, we experienced the immutable laws of supply and demand when an oil pipeline in Alabama burst. Supply suddenly dropped and the price of gasoline rose as a result. Some gas stations ran out of gas as panicked drivers converged on stations in a mad rush to get some of the dwindling supply. This real and local example of basic economics at work should remind us that the irreversible laws of supply and demand will always affect our portfolios – regardless of the commodity.
If a hurricane destroys the Florida orange groves, expect the price of OJ to rise substantially. The worldwide supply and demand of oil and gas is affected by many factors, but some are much more important than others. For example, on August 12th the Wall Street Journal reported “The Worldwide Oil Glut is Vanishing.”
Two weeks later on August 26th, The Wall Street Journal reported “China’s Oil Production Heads Downward.” Given that until now China has been the world’s 4th largest producer of oil, a tipping point, there may be a world-wide game changer. Usually when there is noise at the end of your straw, your milkshake is nearly gone, or in this case oil for one of the planet’s largest consumers of oil and gas. If China becomes a major importer as it appears it might, the worldwide dynamics of oil supply and demand will play out – of course other factors could counteract such an event.
Whenever there are major economic shifts, portfolios will be affected – some will lose and some will benefit. It may be a good time to discuss these important factors with your trusted advisor before the possible changes actually take place.
This is for education only. Before using this information in any way discuss it with a financial professional. There are many risks associated with stock trading. You may lose some or all of your financial investment. Securities offered through Dempsey Lord Smith, LLC Member FINRA/SIPC. Securities offered through Integrated Financial Planning Member FINRA/SIPC. Advisory services offered through Dempsey Lord Smith, LLC.
All the information in this letter is published in good faith and for general information purposes only. We do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information is strictly at your own risk.
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