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It's time to jump aboard the investment opportunities that come with a falling oil price

by , 27 November 2014

Since June, the oil price has slid nearly 30%. This fall means cheaper fuel for motorists, leaving more money in their pockets.

Not only that, a lower oil price not only benefits consumers, it also benefits businesses, large and small.

The price of oil has a powerful effect on the global economy. And the sharp fall means there are some opportunities for investors.

So what's going on with the oil price? And what are these opportunities?

Let's take a closer look…

The path of the oil price

Like all commodities, oil follows a cycle. When the oil price is low, there’s little point in looking for more or investing in new technologies.

Oil producers stick to producing what’s profitable.

Then this dries up and prices start to rise. Then producers start investing in new discoveries or new technologies.

When prices get high, producers exploit any resource they can get their hands on. But developing these takes time.

And no doubt, by the time these oil sources are up and running, the price is down again. And the cycle goes back to the start again, Dr David Eifrig in Daily Wealth explains.

The sky-high oil prices of seven years ago led to the oversupply of today. Not helping is some economies struggling to grow, including Europe, China and Japan.

But it won’t take long for the excess supply to dry up, especially with the low oil price.

Another reason why oil can’t stay down too long is that it becomes too expensive to produce. Producers will cut back on production and prices will rise.

Investment opportunities from a low oil price

With the oil price down at the moment, oil producers are suffering as a consequence. So you could use this time to invest in quality oil companies.

Falling oil prices will cause investors to panic. And this creates great buying opportunities for the savvy investor.

You should look to the big, diverse oil companies. You want big companies that not only produce oil and gas, they also refine, transport and sell it to motorists too.

So there you have it. Why it’s time to jump aboard the investment opportunities that come with a falling oil price.

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It's time to jump aboard the investment opportunities that come with a falling oil price
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