Oil, often referred to as “black gold,” is no stranger to controversy. From fluctuations in world markets to environmental debates, the resource has long captured the public’s attention and imagination. But the market for oil has rarely seen the kind of turmoil and uncertainty seen in the last year and a half of 2020.
The coronavirus pandemic and the resulting economic shutdowns have had a profound effect on the oil industry, with prices for petroleum products plummeting as flight travel and car transportation ground to a halt and homes and businesses resorted to conserving energy to cut costs.
In the last few months, the price of oil has slowly crept up from its record lows. But the effective shutdown of much of the world economy due to the pandemic has caused many to ask what the future of oil looks like.
The short answer? It’s uncertain. But while price and supply forecasts are difficult to make at this point, one thing is for sure: investing in oil during this period of economic uncertainty can be a lucrative venture, particularly for those who buy on the dip.
The phrase “buy when there’s blood in the streets” is a well-known Wall Street phrase that refers to a time when prices have come crashing down due to panic selling or external economic forces. During these times of crisis, smart investors typically have the opportunity to buy low and reap the rewards when prices climb back up.
In the current climate, this phrase has become even more pertinent as oil prices remain low despite supply cuts from OPEC and other countries. As fears surrounding the pandemic linger, the demand for oil continues to be weak, leaving prices unchanged.
But for investors willing to take a risk during uncertain economic times, now is the time to buy. With supply tight and demand uncertain, smart investors have the opportunity to buy up oil ties and futures when prices dip lower.
For those considering a foray into oil this year, understanding the current market condition is key. As with any investment, risk and reward ultimately go hand in hand. But with the world economy still in flux, there may be some rewards to be reaped if oil prices rise once the pandemic fades.