We came across a bullish article about oil infrastructure stocks by LXV Research which holds long positions in Flowserve Corporation (FLS), SPX Flow (FLOW) and Fluor Corporation (FLR).
In their article, they also relied on information from the Bloomberg site about new oil pipeline and their predictions about crude oil prices in West Texas.
When Obama had to open Keystone XL, a 2,000-mile long pipeline that should bring tar-sand oil from an oil refinery in Canada to the refineries in Gulf, Mexico he was not aware of the possible problem but also prosperity that act produces. Although John Henry Hoeven III, the Senator of North Dakota, claimed that it could be a new energy infrastructure and surely one of the most important energy resources in the US, ecologists warned that it could be the new causation of warming planet. However, the opening of new energy source could be a new investment opportunity for those who are looking for long-durable and sustainable investment.
In economy, things could be a very risky and according to that, highly emotional. Even though a good economist estimates long equities of particular companies or resource, things are changing. Causation of those changes could be innovation, geopolitics, futures market positioning, cartel-like behavior or the most obvious tax or subsidy reform, all things that an individual has no influence on. In case of that market is changed, manufacturers and companies decline their profit, lose jobs and literally collapse at the end.
The market is functioning depending on market demands and previous results. Unfortunately, those processes are irreversible. That means that once changed position and production or losing the profit is hard to be back even the source of profit declining is changed or removed. Other word speaking, if you lose the investments it is not possible to correct the error and go back to the right way. In real life and economy, many jobs and investments were failed because of poor estimates, but more often because of changes on the market that is caused by objective causations.
One of the most often reason for changing of the course and failing in jobs is poor investments in jobs that look non-profitable at first glance. That is happening when a negative demand or supply-side shock cause decreasing of the commodities prices, so manufacturers are forced to decrease the price of the goods and lost earnings until their jobs are finally failed. It is hard to start again with the same production and investing in it after the first failure, so many companies lose their positions due to the same reason – fear and hesitance.
That is exactly what happened with oil after historical price dropping in 2014 that stopped in 2016. Due to low fuel value, they have not invested in infrastructure, presuming that costs as not primary at that moment. Now, when the market is recovered, refineries and fuel traders invest in infrastructure again. We predict higher prices of spare parts essential for oil distribution, like valves, flow management equipment, and industrial grade pumps. So, yes, oil pipeline represents a danger for the environment, but most importantly, a changing of the course that caused failure in fuel production in past few years.