NYHFR Survey: Low Oil Price Will Impact Alternative Energy Push

Apr 25 2016 | 11:29pm ET

Alternative investment professionals believe the low cost of crude oil will precipitate a decline in fracking efforts and diminish U.S. efforts to find alternative sources of energy, according to a new survey by the New York Hedge Fund Roundtable (NYHFR).

As the markets continue to grapple with a prolonged period of historically low oil prices, investors have been keeping a close watch on the energy sector and the opportunities that may lie within it. 

Accordingly, for the second year in a row, NYHFR's April meeting focused on opportunities and risks in today’s energy markets, surveying its membership about the sector in general and oil in particular.

Key findings include:

  • Roundtable members believe the decline in the price of crude oil will diminish U.S. efforts to find alternative sources of energy. 68% of respondents to the Roundtable’s latest survey said they think the low price of crude oil will lead to a decline in alternative energy efforts and fracking in the U.S., compared with 49% of respondents who were asked this same question a year ago; while 32% of respondents think the drop in the price of crude oil will not have any impact on alternative energy efforts or fracking, compared with 51% of respondents a year ago.
  • 56% of respondents believe the prolonged period of lower oil prices will create more opportunities in the alternative investment industry; 28% think that if oil prices remain low much longer it could become problematic for hedge funds that have taken large long-term positions in futures and option contracts for crude oil; and 16% think hedge funds are likely to begin shorting crude oil again.
  • Asked whether they believe energy independence or lower oil prices are more important for the economy’s long-term growth, 78% of respondents chose energy independence, compared with 80% of respondents who were asked this same question a year earlier; while 22% chose lower oil prices, compared with 20% of respondents last year.
  • Asked to predict what the cost of a barrel of crude oil will be by the end of 2016, 0% of respondents think it will rise above $70, 28% think it will be between $50 to $60, 66% think it will be between $40 and $50, and 6% think it will fall below $30 per barrel.
  • When asked what type of energy companies will provide the best investment opportunities in 2016, 38% of respondents selected renewable energy companies, 19% chose independent oil and gas companies; 13% picked pipelines; 30% selected large oil and gas companies, and 0% selected oil field services and offshore drillers.
  • Asked which country will be the largest consumer of oil over the next decade, 52% of respondents said China; 16% said India; 29% said the U.S.; and 3% said Russia.

“From the types of cars people drive, to the price of electricity and even foreign policy, the impact of the price of oil is far reaching and cannot be understated. So it is no surprise that the alternative investment industry has been so actively investing in crude oil, whether it is through long term investments or short positions,” said Timothy Selby, president of the New York Hedge Fund Roundtable and a partner at Alston & Bird, in a statement.

Each NYHFR survey includes an interesting bonus question, which with baseball season officially upon us, inquired about favorite stadium snacks. It seems times have changed, as only 3% of respondents said that peanuts and Cracker Jacks are their favorite stadium snack. Instead, 52% of respondents said hotdogs are their favorite snack; while 35% said they prefer to drink their snacks in the form of beer; and only 10% said popcorn is their favorite.

Of the respondents to this survey, 25% were fund managers; 22% were allocators; 7% were risk management or trading; 39% were service providers; and 7% were other industry participants.

The New York Hedge Fund Roundtable is a non-profit organization focused on promoting ethics and best practices within the alternative investment industry. The membership consists of investors, fund managers and other industry professionals who regularly meet to discuss current issues within the industry and connect with peers.

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