The recent $31b move by Exxon Mobile into natural gas illustrates the shift taking place in natural resources. Where oil and gold where once the leading sectors, there are now new sectors to consider for the longer-term. This suggestion does not discount the importance of oil and gold but it does recognize that looking for other natural resource “plays” is valid.
As Exxon has demonstrated, natural gas is one of the leading segments to consider. Its move has signaled that, in all likelihood, there will be a consolidation of the natural gas market. Presently, there is a surplus of natural gas stores as technology investigates and becomes more efficient at removing natural gas from the ground. As end-use of natural gas increases, however, this surplus will disappear fairly quickly. Natural gas for use in fleet vehicles, increased use in industrial manufacturing and as of yet undiscovered uses will find natural gas as a primary fuel source. From this perspective, an investor can investigate a few options. Exploration and extraction, transportation of the gas (pipelines), treatment of the gas or end use are among these ideas for investment. In this regard, one must consider that the investment is not “if”, but “when”. Long-term investment is the key.
A natural resources investment that is less long-term and becoming quite a bit more current is water. Bluntly put, the world is running out of water in many regions of the world or, where there is some, it is not as clean as it needs to be for healthy living. The water investment can also take several varying forms. An Israel investment may be a choice for desalinization equipment. This country is right at the fore of turning salt water into drinking water and has remarkable companies manufacturing the equipment. Water treatment is another option. In all parts of the world, the US included, water sources have been poorly managed and polluted in ways that have likely yet been addressed or have been found to cause significant issues. If one were to realistically look at this particular natural resource, they would see that water will, in all likelihood, be more valuable than gold or oil in the not too distant future.
There is a solid indication of a natural resources shift occurring at the moment. It may be getting a slow rolling start but it is happening. Looking realistically at where this trend is going is a way to profit at a very nice multiple. There are several sectors to consider and appropriate for one’s individual circumstance. Not taking a look at differing natural resource plays, as a small part of a portfolio is at one’s own loss.