Oil used to be the stuff that the markets couldn’t do without. The Organization of Petroleum Exporting Countries (OPEC) meetings were met with traders, economists and governments around the world trembling with fear. Even James Bond films referenced oil supplies as one of the great threats to Her Majesty’s Kingdom.

One of my former business partners long ago wrote a very successful book in 2005 titled, The Oil Factor: Protect Yourself and Profit from the Coming Energy Crisis. In the book, Stephen Leeb discussed the theme of “peak oil.” This concept theorized the world only had so much of the vital stuff and that producers had reached the peak of what was possible to bring to market.

But this was all before technology ramped up in the oil patch. Fracking had been around for many decades but took off along with horizontal drilling, making the U.S. the largest producer of oil.

Now, peak oil has another meaning. Demand, not supply, might be reaching a peak. Of course, the economic fallout of COVID-19 has made this a near-term argument as cars and planes are not moving like they were prior to the virus mess.

Big oil companies are suffering right now. ExxonMobil (NYSE:XOM) has been selling oil field interests. Chevron (NYSE:CVX) has also announced a series of field troubles around the globe and is cutting its capital expenditures by 26% for 2021. Total (NYSE:TOT) is selling fields, including in Kurdistan.

These announcements garner lots of market attention but are really just admissions that there’s no need for expensive fields when U.S. oil and gas is so cheap and plentiful, if and when it’s needed.

In fact, XOM is working on a field that was the site of an ancient coral reef in La Barge, Wyoming, rich in natural gas, helium and highly desirable carbon dioxide.

Peak demand, at least for now, is also impacting refineries around the world. Numerous shutdowns around the globe are underway. Petrol (gasoline) and jet fuel demand is way off, making refineries less economically viable.

Demand After COVID-19

While near-term demand might be a problem, there’s the highly likely return after the COVID-19 crisis wanes. Electric cars have appeared, but there are many infrastructure challenges along with over a billion motor vehicles, as calculated by Ward’s Communications, that still need petrol.

Meanwhile, power supplies are still dominated by natural gas and other fossil fuels despite massive inroads by wind and solar. This means that petrol is still a necessity. And this is why I continue to recommend buying Viper Energy (NASDAQ:VNOM). Viper is the landowner of massive properties in the oil- and gas-rich Permian Basin. It leases out the land to producers and collects royalties from production.

Viper Energy (VNOM) Total Return—Source: Bloomberg Finance, L.P.

The stock has been regaining attention and, after the general stock market rebound from March to date, it has returned 155%. The key is that its lands are only barely developed and are cheap and easy to access without the need of federal permits.

Pipes are another required asset. Utilities need natural gas. Chemical companies need natural gas. Fertilizer companies need natural gas. And trucks and trains hauling Amazon (NASDAQ:AMZN) packages need diesel fuel. But new permits won’t be happening for the next four years. And this makes existing pipes all the more valuable, including those owned by Enterprise Products Partners (NYSE:EPD) and Kinder Morgan (NYSE:KMI).

Enterprise Products Partners (EPD) & Kinder Morgan (KMI) Total Returns—Source: Bloomberg Finance, L.P.

EPD and KMI are also being recognized for their existing pipes now and through to 2025. Since March to date, Enterprise has returned 71.4% and Kinder has returned 43.7%.

On the date of publication, Neil George did not hold (either directly or indirectly) any positions in the securities mentioned in this article.