"We're in an energy shortage, we haven't invested in this industry for 10 years," said Adam Rozencwajg of Goehring & Rozencwajg.
Adam Rozencwajg: "Full-blown Energy Crisis" Started Long Before Russia/Ukraine Waryoutu.be
Tensions between Russia and Ukraine have thrown oil and gas prices into focus, but an energy crisis has been brewing for much longer than the war has been going on.
Adam Rozencwajg, managing partner at Goehring & Rozencwajg, said energy market tightness has been an issue for some time and won't abate even if relations between the two countries improve.
"What I would point out is that the current crisis in Ukraine is not the cause of high energy prices today," he told the Investing News Network. "It's the catalyst that really forced prices up a lot higher, but we were very, very tight beforehand and we're going to be very, very tight here after hopefully some of the situations resolve themselves."
Although this reality is becoming more apparent, Rozencwajg noted that many haven't woken up to it.
"We're in an energy shortage, we haven't invested in this industry for 10 years," he said. "We had abundant cheap oil and natural gas because of the shales a decade ago — we took that advantage and we squandered it to a certain extent, or to a large extent, and now it's really coming home to roost."
Rozencwajg pointed to high-quality US and Canadian oil and gas stocks as potential opportunities for investors, explaining that a de-escalation in the Russia/Ukraine situation could be a chance to buy.
To close, he spoke about two of the biggest misconceptions in the oil and gas space.
The first is that market watchers have consistently underestimated demand, even predicting that 2019 would bring a peak in global oil consumption — in actuality, demand in 2022 will be higher. The second is that US shale supply is not an infinite resource, and the majority of best basins have likely been developed.
"I think it's a very poorly understood market, everyone has left it for dead," he said. "It used to average as high as 30 percent of the S&P 500 (INDEXSP:.INX) at its peak; it got to as low as 1.8 percent of the S&P. Today it's at 4 (percent), so it's still incredibly low, incredibly cheap, no one has any interest, no one's buying the shares."
Watch the interview above for more from Rozencwajg on oil and gas.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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