Experts are warning investors to get out of oil, and a lot sooner than many of us would have predicted. The Organization of Petroleum Exporting Countries (OPEC+) now believes that we will face a supply shortage by the end of 2025. Far sooner than the prediction of 2030 earlier on.
So let’s look at what’s causing this change, and what investors should consider.
What happened
The bottom line here is that the oil market will face this supply shortage as the world simply isn’t replacing crude reserves fast enough. In fact, about 97% of the oil produced today was discovered in the 20th century, not the 21st. In the last decade, less than 50% of oil has been replaced.
As the world continues to use oil in large amounts, it looks as though it could be as soon as 2025 that we face a severe supply shortage. It might seem strange, as right now there is an oversupply of oil. This has held the price of oil rise up despite the current conflict in the Middle East.
However, this short-term demand is going to turn into a long-term supply issue, according to experts. OPEC predicts demand will grow to around 1.8 billion barrels of oil per day by 2025. This would create a huge supply deficit unless OPEC gets rid of current production cuts and allows countries to boost supply.
1 stock to avoid
Amidst all this also came news that Suncor Energy (TSX: SU) will be fined by the Colorado Department of Public Health and Environment. This comes as the company made violations at its refinery in the state from July 2019 through June 2021.
Suncor stock would now have to double the number of air-pollution monitors. It has been labelled the largest air pollution enforcement package the state has ever seen from one facility. The violation also comes after several issues over the years. This includes a fire back in 2022, weather damage which caused a shutdown last year, and complaints about pollution.
Suncor stock has already seen shares drop as Canada’s largest fully integrated oil and gas company struggles to see shares climb to highs. Shares are down 4% in the last year, and down 31% since all-time highs reached in 2008. And with a recent dividend cut from the last few years, it doesn’t look as though the company is as stable as it once was. Even after returning that dividend to normal.
A stock to consider
If you want to get in on the future of energy, I would stay away from oil and gas stocks. These companies continue to show that they aren’t the stable long-term holds they once were. Instead, renewable energy is the future. But if you want access to every type of renewable energy, as well as any type of technology we use, I would instead consider lithium companies.
A top company to pick up these days then would be Lithium Americas (TSX: LAC). The company continues to expand, and has even begun the process of separating into two companies. One would focus on its Thacker Pass production in Nevada, with the other focusing on production in South America.
Right now shares are a steal, with Lithium Americas stock down 67% in the last year. This comes as the stock still hasn’t officially separated. So once that happens, it’s likely you’ll see a boost. But honestly, I would hold this stock for at least the next decade as we continue to use lithium for everything from cellphones to electric vehicles. And at these prices, you can’t go wrong.
