Crude oil remains the most important commodity on the planet. Without it,
economic and political life as we know it would cease to function.
Four BIG trends will determine where prices go next:
- China's transition to No. 1 oil importer.
- The death of Hugo Chavez.
- Iran's distribution of Chinese-made weapons.
- New projections for the U.S. gas boom.
1) China's transition to No. 1 oil importer
Says Javier Blas, commodities editor of the Financial Times:
China has overtaken the U.S. as the world's largest net importer of
oil, in a generational shift that will shake up the geopolitics of natural
resources. [...]
The U.S. has been the world's largest net importer of oil since the
mid-1970s, shaping Washington's foreign policy towards energy-rich countries
such as Saudi Arabia, Iraq and Venezuela.
America is headed in the direction of energy self-sufficiency... making
slow but compounding strides to wean itself off fuel imports. China is headed
in the opposite direction. It's becoming more dependent on foreign oil
sources to keep its economy moving.
This sea change favors America. All the talk of China having
the U.S. over a fiscal barrel pales in prospect to the dragon's growing
energy vulnerability...
2) The death of "El Presidente"
With 18% of the world's proven oil reserves, Venezuela is the
fourth-largest oil supplier to America. And yet under the reign of "El
Presidente" oil production dropped by a fifth. This was due to the
state-owned oil giant, PDVSA, falling into gross neglect and disrepair, as
Chavez turned it into an arm of the welfare state.
Chavez's passing means new opportunity for the Western oil majors to
re-enter Venezuela, renegotiate contracts that Chavez had torn up, and
provide manpower and expertise to help get Venezuelan oil flowing faster
again. This is a longer-term geopolitical positive, but with little impact on
short- to medium-term instability.
- The threat from Iran
Iran's attainment of Chinese-made weapons is raising hackles. Via The
New York Times:
An Iranian dhow seized off the Yemeni coast was carrying sophisticated
Chinese antiaircraft missiles, a development that could signal an escalation
of Iran's support to its Middle Eastern proxies, alarming other countries in
the region and renewing a diplomatic challenge to the United States.
The Middle East has long been a giant fireball in waiting. It is becoming
clearer by the day that Iran wants to strike the match...
- America 's energy revolution
As The Wall Street Journal reports:
U.S. natural-gas production will accelerate over the next three
decades, new research indicates, providing the strongest evidence yet that
the energy boom remaking America will last for a generation.
The most exhaustive study to date of a key natural-gas field in Texas,
combined with related research under way elsewhere, shows that U.S.
shale-rock formations will provide a growing source of moderately priced
natural gas through 2040, and decline only slowly after that...
The impact of the shale gas boom will be profound -- especially as natural
gas makes inroads as a transportation fuel. Major corporations such as FedEx
and Caterpillar are already investing heavily in a switch to natural gas
powered vehicles. Electric cars and hybrids are also strong candidates for
natural gas consumption, as electric power plants are increasingly fueled by
natural gas.
In fact, there are powerful incentives on every level -- military,
political, economic -- for the U.S. to aggressively embrace shale gas.
I'll be recommending ways to play these big trends in future issues of my
global trends newsletter Strategic Wealth Report. Each one holds the
potential for once-in-a-lifetime profits for investors who position
themselves wisely.
Carpe Divitiae,
Justice
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