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Abstract:
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Many economists and financial analysts performed numerous researches on the impacts of oil price on U.S. economy. Research findings show the stock market in general has an inverse relationship with oil price changes. Among all industries, the oil industry demonstrates the highest tolerance to the oil price shock. In such case, are oil companies the “safe haven” investment? This paper analyzes the investment potential of three groups of oil companies: major integrated oil and gas, drilling and exploration, and equipments and services.
Sources of data used in this project include books, financial journals, internet publications, and primary data from Yahoo Finance and U.S. Energy Information websites. This project used the daily stock prices of 117 companies from 2002 to 2011, world demand and supply of oil from 1970 to 2010, and crude oil price from 2002 to 2011 to analyze the growth potential of the oil companies and thus to investigate the connection between oil price and the stock price of oil companies.
Oil, as the primary energy source, can be a good investment option to all investors. The world demand for oil continues to exceed the supply. With oil increasing on a long-term trend, strong oil companies’ revenue will continue to grow. |
