Confused About Which Oil Stocks to Invest in?

Lately, there has been much talk about the debacle that the company British Petroleum (more commonly known as simply BP) is in. An offshore oil rig of the said company suffered a total breakdown which has resulted into an apparently uncontrollable oil spill. Obviously, a multitude is wondering about which are the best oil stocks to invest in.

For the past month, BP oil stocks have been continuously plummeting on grounds of fears by stock traders that the company may be in no position to get out of this socioeconomic quagmire. Furthermore, the ensuing scenario has caused immense destruction throughout the Gulf of Mexico and surrounding areas since then.

However, there are a few things that a lot of people are missing out. Seemingly, a majority of them are more preoccupied at seeing the glass half-empty than seeing it half-full.

Before anyone starts to go into fits of speculation, note that of all the blue chip stocks, oil companies typically predominate. Whichever way, oil is something that nobody can live without. Oil is something that anyone is willing to pay for regardless of cost.

Assuming that BP will spend a billion or two throughout the cleanup, it is only a matter of time before the company recovers the amount and goes back with a big rebound. In essence, this is just an expected part of the business cycle.

People have doubts about the BP’s capacity to actually get through this mess, especially with the successive failures of their cleanup plans. However, in business, before corporate social responsibility, profitability takes precedence. It is quite easy to deduce that the BP’s game plan sequence was formulated based on total implementation costs of each attempt.

With respect to this analysis and to the question about how to invest in oil stocks, there are at least three ways to proceed:

1. Short-selling BP Stocks

BP may still take a while to fix this mess up. Ergo, it is reasonable to conclude that its stock prices will continuously plummet until then. Hence, short-selling is a common-sensical way of taking advantage of the situation.

However, the down side of this tactic is that the situation is already obvious. Hence, any self-respecting stock broker would have already instructed his clients to do such. Short-selling is more of a just-in-case plan. Though the chances of making immense profits on this one is quite unlikely, profit is profit whatever the amount.

2. Bet for the Opposing Team

If one goes down, the other comes up. That is the rule for any industry whose demand doesn’t go down. Since the pies never gets smaller, if there are less people sharing the pie, then everyone left will get a bigger chunk.

This translates to potential improvements in BP competitors’ stock prices, such as those of Chevron and Exxon. However, there are numerous miscellaneous factors affecting stock prices in general. These factors may overshadow this schadenfreude being felt by the oil industry minus BP.

3. Bet for the Underdog

Yes. Based on history, a rebound from BP’s end is quite likely. Hence, it is a reasonable thing to say that BP’s stocks will go up at a certain point in the future. When one hits rock bottom, he has nowhere else to go but up, right?

Furthermore, this is neither the first nor the worst oil spill in history, Exxon Valdez suffered worse back then but, in relation to stocks in general, it was little affected in terms of prices.

Essentially, any possible outcome may happen. Moreover, it is wise to consult a professional who can put into consideration all the possible factors before deciding which the best oil stocks to invest in are.