Anyone who thinks today’s markets are boring is an imbecile.
Anyone who thinks there aren’t any investing opportunities just isn’t looking hard enough.
There are plenty of investment opportunities.
Some of them are obvious. Others are less obvious.
One of the biggest opportunities is in the ‘Dying Empire’. The death of which may still be some years off.
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We are of course talking about the US and its re-emergence as an energy giant…
We recently released a special report. It highlighted the growth of Asia’s emerging markets.
To be precise, it highlighted the growth of one key market — China.
Our point was that a big change is taking place in the world economy. China looks set to take over as the world’s biggest economy within the next 12 years…perhaps sooner.
That may seem like a long time. But it’s not. The time will soon fly. If you want to make the most of China’s coming global economic supremacy, the time to do it is now.
But while we’re big on the huge growth opportunity in emerging markets, don’t think for a moment that we’ve given up on America’s ‘Dying Empire’. There are still opportunities in it yet.
Bigger than Saudi
One sign that the US isn’t in a hurry to give up the status of world’s biggest economy is this report from the Financial Times:
‘The US is overtaking Saudi Arabia to become the world’s largest producer of liquid petroleum, in a sign of how its booming oil production has reshaped the energy sector.
‘US production of oil and related liquids such as ethane and propane was neck-and-neck with Saudi Arabia in June and again in August at about 11.5m barrels a day, according to the International Energy Agency, the watchdog backed by rich countries.’
More than three years ago, energy giant BP predicted that the US would become energy independent within 20 years.
The US is already a net exporter, so it’s on the way to energy independence. This has been a boon for US energy stocks. Companies involved in this sector have seen their share prices soar.
And if the sector continues to boom, there will be plenty more opportunities ripe for the picking.
The shale energy boom in the US has helped revolutionise the economy. Access to a new energy resource means the US is no longer dependent on Middle East oil.
The issue is whether it will still be economical to drill for shale oil and gas if the price falls much lower.
Already over the past few months, the price of crude oil has fallen from around US$107 to around US$95.
It’s still profitable to drill for and produce shale oil and gas at those prices. But will it still be profitable if the price falls to US$70, US$50, or even back to US$20 per barrel?
It probably won’t. But if you ask resources analyst Jason Stevenson, there’s no need to worry about a falling oil price; the price is going the other way. Perhaps as soon as next year…
Oil to hit US$150?
Jason has kept close tabs on the oil story. Big things are happening.
It seems that at last the world has gotten over the fear of ‘peak oil’. That was the idea that ran for much of the 20th century that oil was about to run out.
And while there’s no doubt that it had become harder to find gigantic new reserves, reserves did continue to grow, and so did production.
Now, all talk of peak oil is history. The discovery and production of shale resources is a big reason for that change in attitude.
But if that’s true, why does Jason suggest that the oil price is about to take off? What justification does he give for the oil price potentially hitting US$150 next year?
Jason explains in his latest report, released just yesterday:
‘The risk is that crude production could be significantly cut by disruption or blowing up refineries. In fact, two months ago ISIS took control of the Baiji refinery in Iraq. This is Iraq’s largest oil refinery and produces a third of Iraq’s oil output. You may recall that this was when crude oil hit US$116 per barrel.
‘Now, I’m tipping the Middle East conflict to affect both the demand AND the supply side. That’s why I’m so convinced the price of oil is about to skyrocket to $150 per barrel.
‘Just as an army marches on its stomach, an air force combat wing flies on its gas tank. This will ramp up demand. But in the case of the Middle East, any major conflict is going to squeeze supply extremely hard as well.
‘After all, it’s hard to transport fuel when bombs are raining down from the sky and militants are blowing up refineries. That’s already happening in the Middle East today…but there’s a very real possibility it could get a lot worse.’
You can find out how to get hold of Jason’s in-depth research here.
High oil price now good news for the US
Has Jason got this one right?
Who knows? But if you read the full report, as we did yesterday, you’ll find he makes a compelling argument.
Our personal view is that the oil price is more likely to fall as other countries follow the US lead on shale exploration.
And, like all other technologies, the more widespread it becomes, the more it encourages competition, and that will cause the cost of shale oil production to fall.
Add to that further mammoth oil finds such as that by the Russians recently, and potential monster resources in Southeast Asia’s coastal waters, and you could see a huge glut in oil over the next 10 years.
However, oil exploration and production isn’t as easy as sticking a straw in the ground and sucking the stuff up. It takes years and hundreds of millions, if not billions, of dollars to develop a bumper field.
Right now, until more bumper conventional oil fields come into production, the current oil price looks set to be a great support for the shale oil industry.
And if Jason is right about an impending blow-up in the Middle East, it would have a dramatic impact on the oil price. If the oil price surges higher, it will be even better news for US shale.
The US ‘Dying Empire’ may be on the ropes, but it’s not dead yet.
Cheers,
Kris+
The post What Happens if Oil Soars to US$150 a Barrel? appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
