Wednesday, September 26, 2018

Emperors wearing no clothing... eh oil

Well, the question if OPEC can truly ramp up production to offset the Iranian embargo plus collapsing Venezuela production and production declines elsewhere is coming to a head.  The answer appears to be a resounding ‘No’. This is becoming even clearer in the light of Trumps bellicose demand  for increased production and lower oil prices. Emperor Trump has been politely ignored by OPEC and the rest of the world cannot that easily ramp up production as claimed.

So, all the global blustering by the Saudis, the Iranians and Super-bluster Trump himself has been exposed and we better prepare for much higher oil prices. $80 or likely $100 oil here we come! Where are Canada’s pipelines when the world needs our oil, including our heavy oil?  The incompetence of Canadian governments shows some other emperors without clothes or better without oil. Isn’t it nice to be confronted with reality Mr. Horgan?  After all, Alberta doesn’t even need to cut out your oil supplies – your gasoline prices are about to go through the roof.  If you think rising interest rates are cooling your economy, just wait to see what rising oil prices will do.  

Alberta has gone through one of the worst oil price down turns exacerbated by incompetent governments in a generation and now it is about to flex its muscles. The problem is, Canada despite Justin’s efforts to kill it, is becoming increasingly dependant on its resources, in particular oil and gas. Don’t you Liberals realize our country’s potential?

And yes, if you had any real vision we could have taken advantage of our resources and used the royalties and exploding tax revenues to diversify Ontario and Quebec and even Alberta while helping out New Brunswick and the rest of the Maritimes. Future generations will remember how the Liberal Green Shaft impacted their lives. And to Jason Kenny, now that God has given you another oil boom, please show some vision and not just political expediency: don’t piss this boom away as well. 

Afterall, how many booms will be forthcoming. Alternative energy may not be here in the next few decades, but the world is looking hard for it. Never underestimate human inventiveness. All those noisy and inefficient smoke belching cars may still be replaced by centrally generated electric energy vehicles while our homes will be energized by more efficient solar panels and geothermal facilities over the next century. The economy not Liberals will prescribe to ‘wisely use our resources’. 

Economy AND human inventiveness! Not reactionary activists and I leave of the word ‘green’ out. With them activists forcing less efficient transport of our resources by rail endangering the environment and the safety of our population, it is not that their concerns are for human welfare but rather to support their political ideology.

In terms of investing, I recommend investing in smart forward-looking electricity generators such as Algonquin and Brookfield or smaller outfits such as Innergex and Northland Power.  But don’t forget the rest of the picture and invest also in other resources: Uranium companies such as Cameco, UEC and NexGen. After a nearly 10-year bear market in commodities and the re-emergence of inflation (especially in the U.S. - I wonder what that will do to their interest payments on debt) all those industries are about to prosper. But look further than just Canada – look at Exxon-Mobil, Anadarko, EOG and Shell. Look for, ahem, Beyond Petroleum (BP) 😊. Canada and also the U.S. have always had many intermediate sized oil and gas producers as well and we are unique in offering the world the opportunity to invest in those smaller companies. You’d think you can invest in a junior Aramco? 

XLE is an energy ETF in the U.S. stock market that is also worth looking at. It is up nearly 5% for the year and that is probably just the beginning. Don’t use all your investment power in one blast, but, as pointed out in other posts, just build your positions gradually and never exceed 5% of your stock portfolio owned in one single company (with as possible exception investing in your workplace).


So, let’s remove the noise of emperors without clothes… eh oil. Lets start making money in the revival of the resource industry – not only oil and gas, but gold, uranium and agriculture (Nutrien). Because we have ignored the value of our resources for over ten years and reality is about to bite!

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