As Oil Supply Dwindles, What It Means for ETFs

August 17th at 11:00am by Tom Lydon

images It is no secret that the world’s oil supply is finite and could be depleted within a matter of decades, but what does this mean for shares and related exchange traded funds (ETFs)?

The “peak oil theory” states that the world will be in need of new energy sources within the next decade or so, but what does this mean for oil ETFs?

MoneyEnergy has some startling facts about oil:

  • U.S. oil production peaked at 10 million barrels a day…way back in 1971
  • The discovery of new oil fields (that’s worldwide) hit its peak in 1966
  • World oil production has barely grown since 2005
  • Oil prices hit a record high in 2008, even though Americans had driven 15 billion miles less than a year earlier

Oil is a limited resource and is only going to become more scarce and more expensive in the future, which could wind up being to the benefit of oil-focused ETFs. It could also be to the benefit of the alternative energy industry as Americans look for new sources to power their industries.

In some areas, the situation is even more dire. Saudi Arabia is not only running out of oil – it’s running out of water, too. MoneyEnergy reports that the country has a few plans:

  • Invest in the agricultural sectors of Thailand, Pakistan and Sudan to secure its future food supply
  • Use theirĀ  oil fields to turn salt water into drinking water through desalination; however, this method is questionable, since it burns tons of oil in the process

There is no escaping the impact of declining resources whether you are in Saudi Arabia or the United States.

  • United States Oil (USO): up 8.9% year-to-date
  • United States 12 Month Oil (USL): up 26% year-to-date
  • PowerShares DB Oil (DBO): up 33.2% year-to-date

For more stories about oil, visit our oil category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.