Oil Is The New Tobacco


We highlighted before the decline in capex by (predominantly Western) oil and gas companies. Take a look at this chart, which shows just how steep this drop is:

The irony of the situation is this lack of spending on replacing reserves is paving the way for a repeat of the 1970’s oil crisis.

Attitudes towards oil (and fossil fuels) in the West today are eerily similar to attitudes towards the tobacco industry in the late 1990s. No one wanted to touch tobacco stocks with a 40-foot barge pole, and why should they? After all, tobacco was a dying industry as smoking rates were declining. Once again Westerners only looked at it through developed market glasses. They completely overlooked trends in emerging markets and China in particular, and they’re doing the same thing here, except at a scale that is truly breathtaking.

Oh, and care to guess what the best performing sector was over the last 30 years? Yep, it was those “dirty” tobacco stocks. As the saying goes, history never repeats itself, but it often rhymes.

Disclaimer: This is not intended to render investment advice. None of the principles of Capex Administrative Ltd or Chris MacIntosh are licensed as financial professionals, brokers, bankers or even ...

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