Consolidation in oil industry likely in 2009

Oil price continued to fall on concern that further economic contraction in the U.S., the world's biggest energy consumer, may limit fuel demand. However, it might not be a good time to buy oil but it might be a good time to look into those small to mid cap oil exploration companies as their share prices have slid more than half since last summer and quite a few bargain opportunities emerge.

Major oil companies are sitting on enormous piles of cash after posting record profits in recent quarters, while crumbling stock and crude prices have made many smaller oil and gas companies potential targets. Exxon Mobil, the world’s largest publicly traded oil company, said recently that it has $37 billion in cash.

Exxon Mobil Corp., BP Plc. and other oil giants are having increasing trouble securing new sources of fossil fuels the old-fashioned way — exploring and drilling.

Smaller producers that lack huge capital reserves have been stung by a credit crisis that’s severely limited or even paralyzed their ability to finance new exploration and production.