This market really is ready to move.
The decisive move may not happen today…or tomorrow…or even this month, but it’s coming.
And you better be ready for it.
Because when a bottled-up market like this finally erupts, investors who have been sitting on the sidelines watching and waiting will see the market speed out of sight.
We’re telling you, this isn’t the time to wait and see what happens. This is the time to shoot and ask questions later…
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How can we be sure that something’s brewing?
Investors always need to look out for clues.
It’s one thing to look at the headlines. But remember that the headlines only tell you what has already happened.
So you need to look for the clues that are in the news stories, but which the press has overlooked.
Let’s take the oil price.
High oil prices are good news
Bloomberg reports:
‘Fighting across Iraq, Libya, Ukraine and Gaza, and an accelerating economy, should mean higher oil prices. Yet crude is falling.
‘Six years ago, oil soared to a record $147 a barrel as tension mounted over Iran’s nuclear program and the world economy had just seen the strongest period of sustained growth since the 1970s. Now, West Texas Intermediate, the U.S. benchmark price, has traded below $100 for 10 days and Brent, the European equivalent, tumbled to a 13-month low.’
Why is oil falling even as all these geopolitical risks keep hitting the headlines?
A big reason is the shale oil and gas energy revolution.
Incredibly, thanks to the increase in US domestic energy supply, energy imports will soon account for only 22% of US energy consumption. That’s the lowest percentage since 1970.
But that’s not all.
Note the comment about the Brent crude price. It’s at the lowest level in over a year. That means all that risk premium added by Russia’s stoush with Ukraine, and the insurgency in Iraq has disappeared.
We know you may laugh at us for saying it, but despite all the fears about a terrible market collapse and economic stagnation…it looks as though the energy market has shifted back to normal.
And yes, by normal we mean oil around US$100 a barrel. That’s exactly where it has been for most of the past six years.
An energy revolution
As we’ve pointed out several times before, it’s precisely due to high oil prices that the US is in the strong energy position it’s in today.
High oil prices mean that it’s more economical for firms to drill into the hard-to-reach shale oil and gas reserves.
To drill in these spots explorers and producers need to use hydraulic fracturing (fracking). This is the controversial drilling method that some folks claim causes minor earth tremors.
But aside from that, fracking is more expensive than conventional drilling. Hence, why it really needs a high oil price to make it profitable.
The danger sign for the world’s economy (oddly enough) would be if the oil price had a major drop. That could suggest that world demand is falling, which means economic contraction.
Plus it would also mean that the US’ vast shale oil and gas reserves may no longer be economically viable. That would force the US to become once again dependent on Middle East oil — that isn’t the direction it wants to go.
Cheers,
Kris+
The post Why High Oil Prices are a Good Thing appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
