Bridge over ocean
1 January 1945 Financial Analysts Journal Volume 1, Issue 1

Techniques for Appraising the Petroleum Industry's Operating and Investment Outlook

  1. Joseph Gordon

Knowledge and sound understanding of the petroleum industry's basic economic relationships and global factors (including recent development of huge reserves in the Middle East and Venezuela and uncertainty about oil use in the post–World War II world) are needed to successfully appraise the investment outlook for oil shares. Important factors affecting earnings are price levels and operating margins. Small changes in supply and demand can have great effects on prices. The best indicators of supply and demand are (1) inventories of crude oil and (2) finished products. The principal problems facing the industry are what will happen when price controls are lifted, how big the large reserves and refining capacity in the Middle East and Venezuela are, and what will be the growth in synthetic oil production in Europe.

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