Private Investor: Seduced by the romance of black gold

Let's face it, there is something magnificently romantic about oil and the search for it. You can see that in the recent film There Will Be Blood, and you can sense it in the excitement that greets the price pushing through successive landmarks. At the beginning of the year $100 was breached – wow! But almost as soon as we had got used to that disconcerting notion, along comes the $120 and $125 barrel. The president of Opec says he sees it hitting $200 before long. Even as it stands now, oil has quadrupled in four years. It is difficult to believe that it was worth $10 a barrel only 10 years ago.

It may not be much fun for the rest of us, as we fill the car up and struggle to pay the fuel bills, but for the oil companies, and those invested in them, the soaring price of black gold is unalloyed good news. I've taken a long-term punt on Royal Dutch Shell, topping up the holding from time to time, and a couple of years back followed this up with a small speculative punt on Falklands Oil and Gas. Both shares are still in the portfolio, and have shown respectable returns.

I confess that I always doubted that there is much oil in the South Atlantic. After all they've been looking for it for 30 years, and, as far as I can see, haven't found a drop. Still, at $100 or $200 it will pay them to invest in ever more inhospitable climes, and, well, you never know.

More realistic are Tullow Oil's chances. Now there is another romantic tale – exploring for oil off the coast of Ghana. Here is the potential for a virtuous triple whammy – an oil find that can help keep the world supplied; profits for patient shareholders and riches for the Ghanaians. Now that they've found some oil there, should I buy the shares, I wonder.

The indications, and they are no more than that, are that the company has more excellent prospects, and as I say, every dollar the price of a barrel goes up makes those finds more feasible and profitable. The analysts point to a price of as much as £19 per share on the basis of "unrisked potential", against the 900p the shares trade at now. On those grounds Tullow Oil is obviously very tempting.

Mind you, the risks are pretty clear as well. China will almost certainly stumble before too long, and so will the demand for oil and the price of a barrel. It is always possible that Opec or the Russians or both will oblige the West and start pumping more oil. Maybe Iraq will quieten and return to the market. Demand and supply, in other words, could relatively quickly push oil down again. Where would that leave Tullow Oil?

Maybe not that badly placed, long term. You have to take a bit of a view on natural resources. The present commodities boom is just that – a boom, and will one day turn to bust. Beyond that, though, there seems little chance that the factors that have driven these prices higher over many decades will simply disappear.

So I have decided to let a little romance into my life and buy into Tullow. It's a part speculative buy based on the current oil rush, but also one that makes a case for itself on long-term fundamentals.

I ought to admit that my faith in Rightmove may have been shaken. The figures that have been coming out on the property market are truly appalling. Housing crashes, by nature, never announce their arrival. It is almost precisely at the moment when people really sincerely believe that house prices will never go down, only up, that the opposite state of affairs suddenly intervenes. Then, of course, we think house prices can only ever go down, not up. Fear replaces confidence. Then there's a switchback and people rush for the door.

All true, and worse for the estate agents, given that the volume of transactions has fallen by about a half. But again I think you have to try to keep an eye on the secular story as well, and online estate agency clearly works. The Rightmove site is the market leader and it is easy to use. All the estate agents have to use it, and as they become more desperate to shift homes they may even use Rightmove's facilities more intensively.

So long term that is a winner too, but we will have to get there along a very bumpy road.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'