I have just read “The Last Oil Shock” by Strahan explains why the SP of QGC and companies like it should grow and grow and grow. The book explains why global oil and gas discoveries are petering out, why production is declining and why demand keeps rising. This can only mean one thing – increasing energy prices.
And when will this end? - The book argues never and that we are headed for a post petroleum world.
The book draws the spectre of an ever increasing struggle between the China and the West to gain security of Middle Eastern energy. As China does more and more ‘exclusive supply’ deals we can see this is already a reality. By following this strategy they are shrinking the amounts that can be traded in the market - the life blood of the Western economies – cheep energy.
The book explains that over the last couple of years the supply capacity buffers in the Middle East (mainly Saudi) have shrunk to virtually nothing. If there was a major supply disruption today (e.g. civil war in Nigeria, taps off in Venezuela, a military attack on Iran, an Islamasist attack on Saudi production, a hurricane in the Gulf of Mexico) global production would shrink because there simply isn’t sufficient spare capacity left to fill the (temporary) gap.
In this environment any company which has access to significant and secure supplies of oil or gas would experience an SP windfall. QGC seems to be emerging one of these rare beasts.
The book explains why historically certain oil companies and governments have lied about their faith in a secure energy future. The main reasons put forward are to support their share prices and to not frighten the voters.
Given the circumstances, investing in QGC, before the crunch to come, simply looks like a logical thing to do.
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