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Oil & Gas Companies Are Not Safe from Market Volatility

October 21, 2016 Blog

For many years, oil and gas stocks were consistently considered to be on the low end of the risk spectrum. The major energy companies consistently churned out profits with a positive long-term outlook, and investment advisors recommended their stocks as diversification tools for individual investors who did not want to lose it all.

Well, times have changed. The price of crude has been hovering somewhere in the neighborhood of one-third of its peak in June 2008. Several major oil producers have laid off workers and closed wells over the past 24 months, and some experts are predicting that we will see the energy market crash even further before things start to get better for the oil companies. As published on Forbes.com:

“It’s little secret that oil markets have seen better days – much better days. The current global oil market is one of the worst in a generation, causing angst for major oil producing countries and pain and even bankruptcy for a myriad of oil companies – particularly in the U.S.”

Two Years of Struggle

Nearly two years ago, Business Insider reported on the effects of crude prices dropping to roughly the levels they are at today. It reported that major industry players were scaling back their expansion plans, while smaller companies were being forced to choose between hemorrhaging money in hopes of a shift in the market or simply shutting down their wells.

So far in 2016, oil and gas giants like Shell and Schlumberger have cut thousands of jobs while reducing the scope of their operations in the Gulf of Mexico. Mid-size firms like Noble Drilling have followed suit, and to date there have been approximately 100,000 layoffs in the U.S. energy sector in 2016. Worldwide, that number climbs to over 350,000.

Investment Advisors Are Not Keeping Pace with the Times

If the outlook for the oil and gas industry is at best uncertain, why are many investment advisors continuing to recommend increasingly-risky energy sector investments to their clients?

The answer, in many cases, may simply be a lack of diligence. In our experience, many investment advisors either (i) are not putting forth the effort necessary to make informed recommendations in light of the energy sector’s downfall, or (ii) are not adequately explaining the increased risk of oil and gas stocks, master limited partnerships (MLPs) and other energy investments to individual investors. In both scenarios, these advisors’ failure to do their job effectively is costing their clients dearly, and may constitute a breach of the fiduciary obligations they owe when making investment recommendations.

Oil & Gas Investment Fraud and Scams Are on the Rise

In other cases, we are seeing investment advisors involved in oil and gas scams. The SEC, FINRA and other authorities have all recently warned of an increase in oil and gas scams, and recent data suggest that many of these scams are being perpetrated by registered investment advisors. If you believe that you may have lost money in an oil and gas scam or other investment fraud, it is important that you seek legal help as soon as possible.

Zamansky LLC | Attorneys for Investors with Oil & Gas Investment Losses

The attorneys at Zamansky LLC provide nationwide legal representation for individual investors who have lost money due to advisor misconduct and investment fraud. If you suffered sudden and unexpected losses in energy sector investments, call (212) 742-1414 or contact us online for a free consultation today.