- War and Oil Price Spikes
- The 13
Safe Ways to Profit From Oil
- One Bakken Small-Cap Could Double in Price
Oil investors are looking
for any reason for oil to go up in price these days. We all tacitly know
that much higher oil prices are coming. But with the economy in a perpetual
cycle of stagnation, continued bad news from Europe, and concerns that growth
is stalling in China,
oil can’t seem to find a foothold.
But I believe that oil is
one minor war-action away from higher highs this summer.
That brings me to something
my wife and I encountered yesterday.
I should note, I’m writing
today’s issue from a hotel room in Boston.
My wife and I are celebrating our first wedding anniversary this week.
After spending yesterday
afternoon ferrying between Boston’s
harbor islands, we encountered what I believe may be the catalyst for higher
oil prices this summer.
In Boston Common, amid the
hot dog stands and balloon vendors, hundreds of pro-Palestinian protesters
greeted us on our walk back to our hotel in Back Bay.
Being on vacation, and
trying desperately to avoid television, we weren’t aware of the recent
headlines from Gaza – where Israeli commandoes boarded a flotilla of activists
headed for Israel’s blockade of the 20 mile strip of Palestine.
The protestors all had the
same old pro-Palestine signs, along with some language about a blockade but I
didn’t think much of it –I’ve seen similar signage at International Monetary
Fund protests in Washington DC,
Republican rallies in Philadelphia, Democrat
rallies in Baltimore,
and pro-life/pro-choice marches everywhere in between.
If you rally a few college
students for a cause that someone finds worthy of protest, eventually, the
Israel/Palestine contingent will show up to remind us that yes, the two nations
still don’t get along.
But I’m not here to pick
sides – I’d sooner kick over a hornet’s nest than wade into Israeli-Palestinian
I’m here to survey the
situation for its profit potential.
put, war in the headlines almost always means higher oil prices. War in
the Middle East, even more so.
Take a look at this chart
that plots oil prices in 2008 dollars since the end of World War II:
You can see how oil prices
seem to track Middle East war headlines and
little else. Will Israel
resume hostilities? I don’t know, but it’s exactly these kinds of
headlines that act as a catalyst for higher oil prices.
I use the word catalyst as a
direct metaphor. If you remember from high school chemistry, a catalyst
is a substance that increases the rate of a reaction. A skirmish in Gaza might not pinch the
hose of oil supply one iota, but it can have the effect of making people bid
the price of oil higher regardless of real supply and demand forces.
And as we remember from the
summer of 2008, sometimes higher oil prices themselves are a catalyst for
ever-higher oil prices.
way to play higher oil prices is to buy the biggest and best oil
companies. I use the companies in the AMEX Oil Index (AMEX: XOI) as a
good starting point. These 13 companies represent the biggest publicly
traded oil producers, drillers, explorers and developers. You can see the
names of all 13 by clicking here. In 2008 when oil prices jumped from
$90 up to $140, a 55% gain, this index only moved 30%, lagging oil prices a bit
You’ll see that BP Plc
(NYSE: BP) is included in the index, which isn’t surprising given its
size. I’ve been subtly pointing out that BP currently sells for about as
cheap as you’re ever likely to see a blue-chip oil company. It could fall
further, for sure – and until they’ve capped the leak, I expect them to.
And while I think BP is a great buy, it’s also kind of abhorrent to put your
capital into a company that’s responsible for thousands of gallons of oil being
pumped into the ocean.
So don’t buy BP today unless
you want to own a company that’s polluting the Gulf of
Mexico. But the rest of the companies in that index should
greatly benefit from oil’s upside, and they have the added benefit of being
huge, multinational blue chips. When oil prices fell 75% from $140 down
to $35, this oil index only fell 50%.
If you’re looking for a
stock with the potential to double or triple in a matter of a few weeks, you
might consider investing in a small domestic company that’s already producing
oil in America’s
largest oil reserve: the Bakken.
According to The Wall Street Journal, the Bakken “could contain as
much as 413 billion barrels of oil in place… That’s bigger than Saudi Arabia’s
Ghawar field, which has 125 billion barrels.”
My colleague and Energy
World Profits Chief Investment Strategist Ian Wyatt recently
finished a report all about an American company with the most producing wells
in the entire Bakken formation. It’s a tiny company with a market cap
under $900 million, so I can’t publish its name here – but it’s profitable
today with oil at $74 a barrel. Any increase in oil prices seems to have
a three-fold effect on this company’s stock price.
As oil rose from below $40
last year up to $74 today, this company saw its share price increase from $2 up
to over $14. That’s huge upside correlation with oil prices. If oil
goes to $100 this summer, this could easily be a $30 stock.
If you’d like the name of
this company, I have good news. I want to share it with you, and all I
ask is that you click this link and take a trial subscription to Energy
World Profits. This trial subscription comes with a 60 day money
back guarantee – which should be plenty of time to gauge the success of this
tiny Bakken oil play.
I’ll be in Boston all this week on vacation, but will
still be writing the Resource Prospector. I’ll also
continue to check my email regularly. Please drop me a line at editorial@resourceprospector.