Goldman Sachs recently forecasted that oil would be at $141 a barrel by the end of the year, and rising to $200 a barrel in the not too distant future. I have seen other forecasts calling for oil to slip significantly under $100 a barrel before starting yet another bull market.
I have written for years that we are not going to run out of oil or energy, just cheap oil. I was just in South Africa, where much of their gas and diesel comes from coal gasification. At one time this was an expensive way to make gas, and South Africans had to pay more for their gas than the rest of the world. Now, it is getting close to "par" to the cost of gas in the US, and is cheaper than gas in Europe.
In this week's Outside the Box, my friend David Galland at Casey Research presents some very troubling thoughts on why oil may rise higher than we think in the next few years. Many of the countries from which the US gets its oil are seeing production fall, not rise. Some of it is political ineptitude, but much of it is from oil production peaking.
Yes, we can move to coal gasification, and the US has centuries of coal for such purposes, but building such plants takes time and capital and political will, the latter of which is in short supply. In the meantime, and until we get a full-blown crisis, oil is going to continue on its path to $200 and higher. But such a rise will not only make gasoline prices higher, it will make a host of new technologies competitive for the first time. The shift in how we make energy is inevitable.
As a quick aside, if we would start a project to build a massive nuclear infrastructure, such as in France, which produces 80% of its energy from nuclear, while at the same time pushing ahead in a Manhattan-type project the development of electric cars (or some hybrid), we could reduce our dependence on foreign oil and lower travel costs by the middle to the end of the next decade. And the environment would be cleaner and safer.
We are headed to such a future. It would be nice if we did it sooner rather than wait for a real crisis. But in the meantime, the price of oil is going to rise and opportunities for investors will rise along with it. My friends at Casey Research publish an excellent newsletter highlighting the opportunities not just in exploration companies but in all manner of energy-related firms. As David writes:
"The good news is that there are no shortage of high-quality energy-related investments available ... in coal, heavy oil, LNG, photovoltaics, natural gas consolidators, "run of river" hydroelectric, uranium and small to mid-cap oil companies with the potential for significant near-term gains in reserves or production."
They have agreed to give my readers a risk-free three-month trial to the Casey Energy Speculator. If you like the research you read below and want more of it, you can click on this link and subscribe.
And now let's see one of the main reasons why the price of oil is going up.
I get more questions about gold than other single topic. The fascination for the "barbarous relic" among my readers is clear. This week in Outside the Box we take a look at the gold stocks and the potential future investment opportunity. David Galland of Casey Research provides an intriguing analysis of the gold market today. In particular, why have gold stocks lagged the rise in gold? This is the opposite of what orthodox gold investing strategy says should happen. And I happen to agree with David's rationale for the paradox and his contention that gold stocks are poised (finally!) for the same rise that their base metal brethren have seen.
I have known Doug Casey and David Galland a very long time. Doug got me into my first natural resource stock almost 25 years ago (which ran up 8 times before we sold). They take their research on gold stocks very seriously, and have been quite successful over the past years. While they are more bearish on the economy than I am, their analysis of the natural resource markets and gold stocks in particular has been spot on. In the mid-80's I wrote my first newsletter which focused on gold stocks. I sold it after about a few years as I became bearish on gold, but kept up the interest in the stocks.
But one thing I learned. If you are not on the ground talking to the men who are doing the work, getting into the behind the scenes facts, you are going to have a hard time making money even in a gold bull market. Doug is one of the few guys that truly know what is going on in the market. He knows the difference between those who are serious about mining and those who are simply promoters.
If you are interested in specific gold stocks and gold stock investing, I strongly suggest you subscribe to Doug Casey's letter The International Speculator. Going it on your own or taking tips off a few web sites is dangerous to your portfolio. If you subscribe, they will send you their recent update which covers in-depth all the stocks he likes and a few he says to avoid. I got them to give my readers a risk free trial for three months. For more information on how to subscribe, please click below:
This week in Outside the Box we take a quizzical gander at the gold market, its growth-to-date, and potential future investment opportunity. We have witnessed a significant rise in the gold market from a July 1999 price of $252 an once, to $653 an once today, an increase of 159%. David Galland, of Casey Research, provides an intriguing analysis of the gold market today and the inherit investment opportunity existent on account of severely curtailed research exploration, institutional obstacles, NGOs, and rising global demand, driven primarily from the emerging market economies.
I have known Doug and David a very long time. I made my first dollar on gold stocks back in the mid-1980s when Doug Casey personally called me up and told me to by a particular stock. It was quite a home run and I have paid attention to what Doug says on gold stocks ever since. They take their research on gold stocks very seriously, and have been quite successful over the past years. If you are interested in specific gold stocks and gold stock investing, I really suggest you subscribe to Doug Casey's letter. They will send you his recent update, which covers in-depth all the stocks he likes and a few he says to avoid. For more information on how to subscribe, please click here.