Why Investors Should Take “Lower For Longer” Seriously

There have been some interesting outcroppings from the long down-cycle in oil prices. The weakening of oil companies and their shift in focus from maximizing volumes and profits to hunkering down and just surviving has spurred a lot of what look, on their face, like real environmentalist victories. CEOs now speak in dark, muted tones about the future ‘challenges’ the industry faces, as Schlumberger CEO Paul Kibsgaard did in his recent conference call Friday. Banks reassess the creditworthiness of the marginal E+P’s as companies like Halcon (HK) frantically restructure their debt – in sometimes very ‘interesting’ ways.

This new humbleness from the sector has bled into the political sphere, as candidates are now emboldened to push back against the weakened oil industry. President Obama has cancelled the two remaining auctions for Alaska drilling leases indefinitely, taking a cue from the dry hole exploratory disaster Shell (RDS.A) experienced last month. Hillary Clinton suddenly is firmly opposed to Keystone XL, despite once being head of the same Department of State that found nothing environmentally to oppose in it. Congress is talking about bringing Exxon Mobil (XOM) execs to Washington to investigate their suppressed research on fossil fuels and climate change. There is a movement to begin a new ‘tobacco-like’ hunt for injury to the public good here, something that I find impossible to believe would find any traction at all if oil was still selling for $100 a…