Wall Street Grasps Big Oil's Lumbering Future

Wall Street is narrating the story of the decline of Big Oil. Bloomberg’s Fred Pals and Eduard Gismatullin report today that fewer than half the analysts they track are recommending Exxon and Chevron. But almost all are championing Gazprom and Brazil’s Petrobas.

It means that investors are getting the big picture – the long-term future is with state-owned companies with access to huge, home-grown reserves, and the technology-laden oil service companies that can help them get at it efficiently.

There are few scenarios in which Big Oil has a bright future. One is for companies that merge with state-owned oil enterprises. Another is the doomsday global warming option – the Arctic cap melts, the world panics, and suddenly they have free access to the huge polar oil and natural gas reserves now roped off because of technological and environmental obstacles.

Guy Chazan at The Wall Street Journal has a piece today on Gazprom’s steady retail inroads into the European gas market. Some prominent analysts have recently argued that Europe has actually got Russia over a barrel when it comes to energy and economic leverage. This reminds me of the boxer who emerges from the ring to say, “I’ve got that guy just where I want him. Did you see? I hit him five times in the glove with my face.”

Here is what Bloomberg says about Wall Street’s current view of the industry: “Twelve of 13 Wall Street analysts tracked by Bloomberg tell investors to buy Gazprom and 15 of 15 recommend Petrobras, the biggest oil company in Brazil. For Exxon Mobil, 10 of 21 endorse the stock, while for Chevron Corp., the second-largest U.S. oil producer after Exxon, it's eight of 21. Shell's A shares in London have a ``buy'' rating from 20 of 37 analysts.”

Photo: Pankration Research Institute
Rights: Creative Commons