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Luke Oil reported today a staggering increase in its profits. What could hap= pen should Crude prices jump to $ 90 plus per barrel? =20 If you think oil prices are high now, you ain’t seen nothin’ yet. The good= news is that you can profit from oil’s next move. That should help you pay = your soaring bills when gasoline accelerates past $4 a gallon. More on that = in a moment. First, let’s talk about why energy prices are on the move. =20 About a month ago, I gave you “Three Triggers for Higher Oil Prices.” Just= to refresh your memory, they are: 1. the potential for monster hurricanes i= n the Gulf of Mexico, 2. spreading violence in the Persian Gulf, and 3. a po= tential al Qaeda attack on U.S. oil facilities.=20 =20 Since then, oil prices catapulted from $66.26 to as high as $75 a barrel y= esterday. And guess what? None of those three things I warned you about have= even happened yet! =20 Mind you, I think these scenarios are only getting more likely. For exampl= e, we haven’t seen any hurricanes in July, but we usually don’t. Historicall= y speaking, August, September and October are the busiest months for tropica= l storms. =20 You’re probably wondering why oil prices have been rising even without the= se catalysts. The reason is simple: The supply/demand picture for oil is tig= ht and getting tighter. =20 In fact, I’m here to tell you that even if NONE of those big three things = happen, we could still see $90-per-barrel oil this year! And if one or more = of those dire events I warned of actually happens, prices could spike even h= igher. =20 Let me explain … =20 Oil Prices Are Riding the Wave of Global Expansion =20 Why is oil going higher? Simple — the global economy is growing, business= from Brazil to Singapore is booming, the world’s population is trading in b= icycles for cars, and global oil demand can’t keep up. Some critical facts … =20 The global economy is growing at about 4.5% per year.
=20 As a result, The International Energy Agency (IEA) projects in its Medium= Term Oil Market Report that global oil demand will grow 2.2% a year, on ave= rage. By 2012, it should reach 95.8 million barrels per day (bpd) vs. 86 mil= lion bpd this year.
=20 At the same time, spare capacity — almost all of which is in Saudi Arabi= a — is going to approach the vanishing point.
=20 Even worse, the IEA expects supply increases from non-OPEC oil producers = and biofuel producers to start dwindling even earlier — around 2009.=20 All that boils down to an ugly picture from the IEA … =20 As you can see, even with moderate GDP growth, the world’s oil demand gro= wth is going to start outpacing supply growth by 2010! =20 =20 And even if the global economy slows down, global oil demand growth will s= tart outpacing supply in 2011! =20 In other words, the “Big Squeeze” will start within four years … regardl= ess of what economic scenario you believe in. Plus, the IEA has more gloomy news for us: =20 We’re getting between 3% and 4% LESS out of existing oilfields every year= .
=20 Mature producing areas and many recent deepwater projects are declining a= t even sharper rates — 15% to 20% annually!
=20 All told, the oil industry needs to add three million bpd of new supply e= ach year just to offset declines in existing fields.=20 Yet the oil majors are having trouble finding oil. For example, last year = was the first time — EVER — that Exxon didn’t replace its reserves through= its own drilling, according to Oppenheimer research. =20 The situation is complicated by another fact: More and more of the world’s= oil reserves are under the thumbs of national oil companies, such as Saudi = Arabia’s Aramco, Mexico’s Pemex, and Venezuela’s PDVSA. =20 These companies aren’t as efficient as Western majors at finding oil, and = the countries that have the remaining large oil deposits often scare off or = even forbid outside investment. =20 Sounds bad, right? It is. However …=20 =20 The IEA Is Probably Being Too=20 Optimistic About Global Oil Supplies! =20 If anything, the Big Squeeze might come sooner than the International Ener= gy Agency’s 2010-2011 forecast. Here’s why … =20 The IEA is expecting OPEC to ramp up production by about 600,000 bpd next = year to 32 million bpd. =20 But OPEC’s latest report reveals that the cartel’s production is actually = FALLING — down to 30.06 million barrels a day in June. That’s a drop of 96,= 600 bpd from May. =20 What’s more, according to the IEA’s own chief economist, Fatih Birol,=20 “If Iraqi production does not rise exponentially by 2015, we have a very= big problem, even if Saudi Arabia fulfills all its promises. The numbers ar= e very simple, there’s no need to be an expert.” Well, the latest OPEC report shows that Iraq’s production is falling the f= astest of any of the cartel members — a drop of 78,000 barrels per day in J= une. =20 =20 You know what the situation in Iraq is like. Civil war … chaos … madne= ss! Do you think Iraq will experience “exponential” growth in its oil produc= tion anytime soon? No way! =20 And Iraq isn’t the only OPEC member with declining production. In June, Ku= wait and Venezuela saw declines of 38,300 and 34,000 bpd, respectively. Saud= i Arabian production also fell — by 33,300 bpd. The Saudis say they can tur= n the spigots back on. Let’s hope that’s true. Meanwhile, oil production is declining in some non-OPEC countries, too.=20 =20 I’m talking about places like the U.K., Norway, and Mexico.=20 =20 Goldman Sachs Group Inc. said in a report on Monday that Saudi Arabia, the= United Arab Emirates, and Kuwait must increase production by the end of thi= s summer. =20 According to the Wall Street firm, this production increase is “critical” = to avoid prices surging above $90 a barrel in the fourth quarter of this yea= r. =20 Here’s How You Can Prepare=20 For Even Higher Oil and Gas Prices =20 First, you can buy a fuel-efficient car. To see the EPA’s list of the most= fuel efficient cars.=20 =20 Second, talk to your boss about telecommuting two or three days per week. = You’ll save time and money. And you’ll help America kick its addiction to fo= reign oil in the process. While it’s unlikely that we can totally eliminate = our dependence on Middle Eastern oil, the less we use of it, the less of a s= tranglehold the Saudis have over us. =20 Third, invest in underloved oil and gas stocks that are going to ride the = wave of higher prices. I just recommended two issues to my Red-Hot Resources= subscribers on Monday — stocks that trade at eight and nine times earnings= .=20 =20 For some reason, Wall Street just can’t see these gems waiting to be scoop= ed up — even with oil prices poised to go sky-high.
Safe Harbor Statement: =20 Some forward looking statements on projections, estimates, expectations & ou= tlook are included to enable a better comprehension of the Company prospects= . Actual results may, however, differ materially from those stated on accoun= t of factors such as changes in government regulations, tax regimes, economi= c developments within India and the countries within which the Company condu= cts its business, exchange rate and interest rate movements, impact of compe= ting products and their pricing, product demand and supply constraints. =20 Nothing in this article is, or should be construed as, investment advice.= =20 =20 =20 =20 =20
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