The International Energy Agency (IEA) has made it official.
Low oil prices are here to stay.
The group announced on November 10 it forecasts a barrel of crude to sell for $60.00 next year and $80.00 in 2020.
OPEC is largely the cause of the weakest oil market in ten years. The cartel recently decided to keep its 2015 production at 2014 levels in a bid to flood the market with cheaper crude and drive out a lot of newer unconventional producers.
Their plan is bearing fruit. Many of smaller players in the shale game have already shuttered their doors. Others could soon follow if prices remain at depressed levels.
But within this turmoil, the seeds of opportunity could soon be sewn.
You see, the natural gas industry went through a similar period of boom and bust over the past decade as well.
New drilling methods unlocked vast gas resources in reservoirs previously thought to be undevelopable. The resulting glut in supply caused prices to sink to levels where many of the new players in the game had to shut down.
That’s when the Big Boys like Chevron and Exxon Mobil stepped in and snatched-up natural gas resources for cheap. That move is starting to pay off.
From fuel for cars to power generation, natural gas demand today is higher than ever, and is expected grow dramaticall yin the coming decade.
According to the EIA (U.S. Energy Information Administration), coal supplies forty-one percent of the power in this country, compared to twenty-seven percent from natural gas, In the next twenty years that’s expected flip, with natural gas soon providing the lions share of the nation’s power.
Furthermore, to power their fleets, the Department of Defense agency and companies like Waste Management have slowly been switching to natural gas.
So how do you take advantage as an investor? Well, one company that jumped on the chance to buy natural gas assets on the cheap was Exxon Mobil Corporation (NYSE:XOM).
Exxon bought XTO Energy for $36 billion in 2010. At that time, XTO was the biggest natural gas producer in the United States. Now Exxon it’s sitting on one of the largest mountains of natural gas in the world.
Exxon also offers a dividend yield of around the 3.5% range. That’s higher than most times in its history.
So on the one hand, you’re buying a company that stands to benefit dramatically from a rise in energy prices as it has some of the largest oil and gas reserves on the planet. And on the other hand, you’re getting paid a nice little dividend while you wait for that to happen. Sounds like a win-win to me.