So, the crude price is falling. Oil majors like BP and Royal Dutch Shell, and oil services companies like Schlumberger, are cutting jobs, as their once-huge profits are turning to losses. The rout in commodity markets is total. And tumbling share prices mean that investors are running for cover.
The 16-year oil boom is well and truly over
There's no doubt that the great oil boom of the last 16 years is well and truly over. But does this mean that this industry is set for a future of steady decline? Is this the end of the last oil boom?
Leading producer Saudi Arabia certainly seems to think so. It has announced a $2trn fund as it plans for life after oil. Hydrocarbon producers have made fortunes from the boom, and many have wisely saved up or invested much of their income.
Even with oil prices low, there's still a strong trend away from crude and towards other sources of energy. Adjusting for inflation, in the mid-1970s solar energy cost $96 per watt to produce. Today the cost is down to around $1 per watt. Technological advances mean that, for the first time, solar energy can compete with traditional forms of energy. Other renewables such as wind and tidal power are also increasingly competitive.
And these clean sources of energy present no threat to the environment on a planet where temperatures are still rising because of global warming. Once energy producers cotton on to the fact that renewables are now competitive, we may see take-up of these energy sources start to climb rapidly.
If you want to invest in oil, be patient
Yet the picture is more complex than that. After all, the world's population is still rising, and those in the growing middle class are buying more cars, motorbikes and TVs. This means global energy demand will continue to rise for decades to come. And while there's increasing take-up of hybrid and electric cars, almost all new vehicles are still petrol or diesel-powered.
This nuanced picture shows energy demand edging upwards, but with the energy mix moving gradually away from hydrocarbons and towards renewables. That's why I think this isn't the end of the last oil boom.
But how long would you have to wait to buy back into BP, Royal Dutch Shell and Petrofac? Well, I firmly believe that you should avoid these companies for a long time to come, as we enter a new reality of low commodity prices. But after this bear market there will, eventually, be another bull market.
However, I'm afraid, you'll have to be rather patient. I wouldn't start buying in until, perhaps, 2035.
Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Petrofac. The Motley Fool UK has recommended BP and Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.