Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

How to Profit From Peak Oil as Crude Oil Prices Set to Double

Commodities / Crude Oil Jun 18, 2010 - 05:42 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticlePeter Krauth writes: If there's one thing U.S. investors need to know about the future, it's this: Oil prices are headed higher - much higher, in fact, and could well double to reach $150 a barrel.

And if that's what the future holds, you may as well go along for the ride...


U.S. oil prices fell for the first time in four days yesterday (Thursday) - ending a rally that had taken crude prices to a six-week high. Crude oil for July delivery now stands at roughly $77 a barrel, meaning oil prices would need to nearly double to hit my target of $150 a barrel.

But I think that can happen - and here's why.

A Wakeup Call
America is about to get a sobering slap in the face.

And that slap will have to do with the country's passive, unimaginative and downright-haphazard national energy plan.

Under U.S. President Barack Obama, it seemed as if the United States was finally going to create the innovative, broad-based and forward-looking energy policy that this country has badly needed for decades.

Then along came BP PLC (NYSE ADR: BP), and the Deepwater Horizon oil spill that now threatens the Gulf of Mexico ecology and the entire U.S. economy. Now the villager pitchforks are all pointing at BP for that mammoth oil spill - instead of at the Inside-the-Beltway crowd as a way of "motivating" them to re-cast the energy policy to account for the BP disaster.

Did BP mismanage this fiasco? That's a pretty safe bet.

Is offshore oil drilling about to suffer a major kick in the pants? It definitely seems so.

I'm not expecting any new offshore drilling for some time: Public sentiment has swung way against offshore exploration, and I expect the government to seriously ramp up oversight.

U.S. consumers flat out take oil - and energy in general - for granted: The lights come on at home or at work when we flip the switch; the pumps are full when we pull up to the gas station; and oil and energy are still pretty cheap... at least, for now.

But Americans need to realize that "demand" is evolving. Other countries around the world are looking to improve their standards of living. And based on the technologies now available, such upgrades require oil - lots of it, in fact. Oil influences so many facets of our daily lives: Transportation, energy, consumer goods, packaging ... the list is long. And given our current plight, that list is also sobering.

I know, I know, we may only now be emerging from a deep recession, Europe's got big problems, and we could experience a slowdown in growth for Asian economies. But despite this, oil consumption is still rising. And America remains a big part of global demand.

America' Appetite for Oil

The United States consumes 20 million barrels daily. That's more than the next-five-largest consumers - China, Japan, Russia, Germany, and India - combined. Of those 20 million barrels, 56% are imported. The imports alone represent more oil than Saudi Arabia produces in a day; in fact, it accounts for nearly 20% of the world's entire production.

Meanwhile, America's own oil is drying up. The Gulf spill - and the accompanying ban on offshore drilling - will only exacerbate the shortfall that's sure to escalate.

Even with all the exploration dollars and the most advanced exploration technologies available, the United States' oil-production numbers have been heading south for 40 years.

Sure, there have been ongoing discoveries, but too few, and none of the size required to stem the nation's growing dependence on foreign oil.

Last November the IEA (International Energy Agency) reported that oil production from operating wells has declined by as much as 9.1% annually. Then in March, the U.S. Department of Energy (DoE) indicated that if investment is insufficient, there could be worldwide declines in liquid fuels production starting next year and stretching to 2015.

But relax. According to the U.S. Department of Energy (DOE), the concept of "peak oil" is, well, bunk.

Feeling reassured now? Me neither. And here's what's bothering me...

Slick Contradictions

Last April, in the aptly titled report, "Meeting the World's Demand for Liquid Fuels, that same DOE projected stable increases in fossil fuel production all the way to 2030. How anyone can forecast 20 years into the future with a straight face baffles my mind.

Stay with me here, because that same DOE, in that same report, acknowledges that it doesn't know where this additional production will be sourced. Their report goes on to indicate that current and known oil production sources will start to decline within just two years.

It would seem the government believes that the expected daily shortfall of an estimated 10 million barrels of crude (again, nearly all the oil the Saudis produce) will just be "wished" into production.

That makes it my turn for making a prediction. And it's one that I'm pretty confident about making: I don't expect anyone to find another Saudi Arabia's worth of oil anytime soon, much less get it into production by 2012. But maybe that's just me.

And when producers are able to fetch $100 per barrel, there's little incentive to boost production and drive prices back down. Instead, this allows them to maximize profits, even as they extend reserves. That's just shrewd business strategy for those producers.

Plus, with so much oil controlled by national governments - Saudi Arabia, Iran, Libya, Algeria, Venezuela, Nigeria, Russia and Mexico, for example - years of severe mismanagement and under-investment bode badly for supply, but bode well for significantly higher prices.

A Pair of Plays on Higher Oil Prices

I don't see any major production increases anywhere on the horizon, yet demand shows no real signs of easing. Therefore, the only thing left for us to do is to position ourselves for maximum profit.

After reviewing a number of energy-related companies, securities and funds, I decided on two that offer the right mix of such factors as upside potential, liquidity, safety and timeliness.

Those two oil-related investments consist of:

•Apache Corp. (NYSE: APA): This is an explorer/producer of oil, natural gas and natural-gas liquids. It's a $30 billion market-cap company, trades at a palatable Price/Earnings (P/E) ratio of 14, and it pays a small dividend. The company explores and operates in the Gulf of Mexico, Texas, the Anadarko Basin, Canada's Western Sedimentary Basin, onshore Egypt, offshore Western Australia, in the North Sea (off the coast of the United Kingdom) and in Argentina and Chile. I like the geographical mix, as well as the commodity mix, which breaks down as 51% oil and liquids, 28% North American Gas, and 21% international gas. The BP Gulf oil spill seems to have exaggerated recent price weakness for Apache. At the time of this writing, Apache's shares were trading about 12% below the 200-day moving average and heading north. Apache makes a great long term "Buy."
•First Trust ISE - Revere Natural Gas Exchange-Traded Fund (NYSE: FCG): This is an ETF that tracks the performance of a basket of companies that are focused chiefly on natural gas exploration and production. The United States needs to continue emphasizing its own energy resources, especially resources of the-more-environmentally-friendly variety. Natural gas clearly fits that bill, and the stuff is relatively cheap at around $4.80 per million British thermal units (MMBtu). This ETF's holdings include such heavyweights as Mariner Energy Inc. (NYSE: ME), Brigham Exploration Co. (Nasdaq: BEXP), Pioneer Natural Resources Co. (NYSE: PXD), Forest Oil Corp. (NYSE: FST), EOG Resources Inc. (NYSE: EOG), and Anadarko Petroleum Corp. (NYSE: APC). The fund is currently trading below its 200-day moving average and its share price also is trending higher. So the FCG ETF is a clear "Buy" at current levels.
Sure, it would be nice to just move to renewable pollution-free fuels, but that's decades away - if ever. Besides, many technologies can't be converted, so as long as they're in use, oil will have to fuel them.

If the picture of the future I've painted here is one that's causing angst, or even fear, that's probably not a bad thing: This is the future I believe we're going to have to face.

My advice: Get used to it, and get ready for it. Oil is going higher. You might as well go along for the ride.

Source: http://moneymorning.com/2010/06/18/oil-prices-20/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules