25 Jul “He Who Controls the Oil Controls the World”
What we’ve seen geopolitically is the countries that do not have access to their own petroleum reserves and ability to refine are now at the whim of those who do. As renewables have failed to keep up with demand in EU and UK, these countries are now considering petroleum rationing and buying from dubious sources as their prices have gone sky high during a worldwide heatwave! The BRICA (official and unofficial) countries are buying petroleum from Russia and other countries on the NATO naughty list at discounted rates, then flipping excess to NATO (or the like) countries for a nice profit! Can’t blame them!
So, who rules the universe now? Those with the reserves, the means to refine, and can transport. Saudi Arabia and Russia (and their affiliate funnels Kazakhstan & Azerbaijan) are the leaders in the clubhouse, followed up by Nigeria, Canada and the US.
I’m betting pretty soon that NATO countries will not adhere to rationing and will start to succumb to Russia’s terms (including control of Ukraine). Since these countries are not directly sending human assets to the war, the citizens will feel more distant from it and care more about staying cool/warm. Europe will cave and Russia will deliver product at global prices by November.
So, what does that mean for the US domestic investor?
Although there are clear warning signs of a global recession (China being the first to cut LNG due to cost) and the rise of popularity of coal as fuel (crazy, right?), I still think that the US oil and gas industry controls its own destiny on price as demand here may wane a little, it won’t be more than 10% for the remainder of 2022. I’m still bullish on any E&P deal when oil’s above $80 and natural gas above $4 (the new “green” fuel). Our stockpiles are a little under and demand is good domestically and globally (for now).