On the Cusp of the Restructuring of Energy Industry

After the meeting of the G7 finance ministers over the weekend and the agreement by major economic powers to undertake a rescue of the world's financial system, crude oil prices rose. But Tuesday, when more investors were back in the market, fears of the impact on economic activity from a major recession next year took hold and drove oil prices back down under $80 a barrel. Many investors may be thinking that $80 a barrel is the new base price, but if we have a significant decline in energy demand prices could head well below this new marker.

We have recently had a reader suggest that the bottom for crude oil and natural gas prices will be $45 a barrel and $4 per thousand cubic feet before demand pushes them back closer to $65 and $6.50. The fall in commodity prices will hurt the oil and gas companies and the oilfield service companies - especially those focused on natural gas in the United States. But what this price scenario suggests is that the major international oil companies who are being chastised by Wall Street and shareholders for not growing their production will become buyers. Expect smaller, asset-rich companies such as Chesapeake Energy, Anadarko Petroleum and Devon, to name a few, are likely candidates to be gobbled up. This may not happen until early next year (after winter) so watch their share prices for investment opportunities this winter.