The Bull Case For Oil

As oil goes, so goes the world. [Altucher Confidential] February 10, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Important housekeeping note: Your emails are coming from a new email address: [AltucherConfidential@mb.paradigmpressgroup.com](mailto:altucherconfidential@mb.paradigmpressgroup.com). Ensure delivery of every email in your subscription by [following these simple whitelisting instructions.]( You might not like Jim’s conclusion… but, the truth might keep you warm. [Hero_Image] The Bull Case For Oil By Jim Rickards OPEN NOW: Tiny startup poised to grow 56x in two years For a limited time (potentially only a few hours), you have the chance to partner up with a millionaire investor on a deal he says could make 56x in two years. But once we hit the $10m funding limit… This deal will come off the table. There’s no saying when that’ll happen. [So we recommend you get the full details now to avoid missing this.]( [Chris Campbell] CHRIS CAMPBELL As Ohio goes, so goes the nation. That’s an old political slogan about my home state — the ol’ bellwether. Most people don’t want to believe it’s still true. If you live in LA or NYC, the idea that a flyover state — and not a trendy megaregion — is a leading indicator for the country’s fate is just too depressing. And maybe it isn’t anymore. But there’s a lot of things people don’t want to believe. Such as… As oil goes, so goes the world. You probably know this, but… Our colleague Jim Rickards isn’t confident about our ability to whiplash the economy green. Which is why, today, he’s decided to tackle an oft-asked question: Where’s oil headed? You might not like his conclusion… but, the truth might keep you warm. Read on. Where’s Oil Going? Jim Rickards Where are oil prices going? That’s one of the most frequently asked questions (and most difficult to answer) in markets today. A bull case can be made on the basis of persistent inflation, shortages due in part to the war in Ukraine, the Biden administration’s war on oil and natural gas and the reopening of China after the worst of the pandemic. A bear case can be made on the basis of recent disinflation, an emerging recession and demand destruction due to the Federal Reserve’s interest rate hikes and desire to reduce wages. So which case will prevail in the months ahead? The Tug-of-War in Oil Prices First, a review of price trends over the past year: Oil (as measured by the WTI front month Nymex futures contract) hit an interim high of $123.70 per barrel on March 8, 2022, shortly after the Russian invasion of Ukraine on Feb. 24. The price eased slightly to $95.04 on March 16 once it became clear that Russian oil exports wouldn't immediately be cut off by sanctions. In fact, Russian exports continue to this day subject to U.S. and EU price caps and limitations on exports by tanker. Oil hit another interim high of $122.11 per barrel on June 8. That spike coincided with the peak in U.S. inflation and the coming of the summer driving season. From there, the oil price began a relentless decline. By Dec. 9, the price of oil had fallen to $71.02 per barrel. That’s roughly a 42% collapse from the June interim high. Today, oil is about $75.00 per barrel. That’s still higher than the December low, but still down about 35% from the June high. While the price spikes in March and June were driven by fears of supply disruptions and the highest inflation in 40 years, the recent lows have been driven by the opposite forces. Fear of supply shortages has been replaced by demand destruction caused by Fed rate hikes and a slowing U.S. economy. Numerous leading indicators (especially inverted yield curves in U.S. Treasury securities and Eurodollar futures) point to a recession, which may already have started. Inflation measured by the consumer price index year-over-year has come down from 9.1% in June 2022 to 6.5% by December. That’s still a high rate, but the decline has been persistent with inflation dropping every month from June through December. Disinflation has displaced higher inflation, and there’s every reason to expect this trend to continue. In short, supply-side disruption and inflation took the price of oil to $122.00 per barrel. Demand destruction and disinflation took it back down to $75.00 per barrel. Given that the Fed continues to raise rates, the U.S. (and global) economy continues to slow and inflation is on the run, a reasonable forecast might put oil prices at $50.00 per barrel, where they were as recently as Jan. 3, 2021. Attention! Before You Read Any Further… [Click here for more...]( Hey, it’s James. Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on claiming this upgrade to your Altucher’s Investment Network subscription, you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Altucher’s Investment Network to an entirely new level and I’d hate to see you left behind. [To see how to claim your upgrade, just click here now.]( A Recipe for Higher Prices? Of course, forecasting is never so simple. Any downward projection has to ignore the recent rally. What’s behind that rally, and why might we expect oil prices to continue to rise? While demand is declining because of the coming recession, it’s the case that supply is declining even faster. Unlike early 2022 when the supply disruptions were largely logistical and geopolitical, the supply problems today are fundamental. Beginning on day one of the Biden administration, the White House took steps to destroy the U.S. hydrocarbon industry. The litany is well-known. They terminated the Keystone XL pipeline from Alberta to the United States. They banned new offshore drilling for natural gas. They halted new oil and gas exploration leases on federal land. New regulations were imposed on fracking. In the ridiculously misnamed Inflation Reduction Act signed in 2022, the administration authorized almost $1 trillion to implement the Green New Scam including subsidies on electric vehicles (EVs), subsidies on solar panels and funding for offshore windmill farms. These radical actions were accompanied by many state initiatives from California to New Jersey, banning sales of new internal-combustion engine (ICE) automobiles after the mid-2030s and mandating electric-powered school buses and urban transportation systems. Other nations from the Netherlands to Australia are taking similar extreme measures. But there is no climate emergency. Green Energy: No There There The wind and solar alternatives to oil and gas are non feasible in terms of maintaining baseline power to support the grid. There is not enough lithium, nickel, cobalt, graphite and copper in the world to build more than a small fraction of the batteries needed to replace ICEs with EVs. If EVs were in wide use, the vehicle charging requirements would crash the grid. Yet all of these green failures are still in the future. For some years to come, the Davos crowd (including White House officials) will persist in attacking oil and gas. As a result, executives of major oil exploration and production companies are slashing capital expenditures and new exploration. Major new oil fields require 10–15 years of development through discovery, rights acquisition, environmental permitting, regulatory permitting, political liaison, infrastructure installation, connecting energy sources to power drilling and pumping operations and much more. The oil field itself might take 10 years to recover these huge capital costs before finally producing profits over the remaining 10 years of production. What energy executive wants to commit billions of dollars of oil exploration and production costs over a 20-year horizon when politicians have vowed to eliminate the use of oil and natural gas in 10 years? The answer is none. Limited New Production Energy companies will keep existing fields in production, although they are rapidly depleting. New fields are not coming onstream because of the hydrocarbon animus of the Davos crowd. Even some existing fields are being shut down because oil majors such as Chevron, Shell, Exxon Mobil and BP have curtailed operations in Russia or sold local interests to Russian buyers. New operators lack the technical resources of the oil majors to keep production at former levels in the harsh environment of Siberia. To the extent that Russia has been able to maintain oil production, that oil is increasingly being sold to China and India, which further reduces supply to the West. The energy bottlenecks in the U.S. are not limited to oil production. Refineries are a crucial link in the energy supply chain because they convert crude oil into distilled products such as gasoline, diesel, kerosene and jet fuel. No new refineries have been built in the U.S. since 1977. Existing refineries are aging and require extensive maintenance and repair even to maintain their current inadequate level of production. In short, a temporary alleviation of some supply bottlenecks of a logistical type and a cooling of inflation pressures at a time of emerging recession have caused a moderation in oil prices. The Davos Crowd Can’t Repeal the Law of Supply & Demand Still, inflation may stabilize sooner than many expect (because of a recession). Supply chain problems will return to haunt energy markets, not because of logistics, but because of a dearth of new investment – an understandable reaction to the onslaught of anti-carbon hysteria from the White House and their European allies. The war in Ukraine will not be over soon and the likelihood of Russian victory there portends even more stringent sanctions on Russian energy. Iran is another hotspot where acts of terrorism on Israel by Iranian proxies and Israeli retaliation against Tehran may result in further restrictions on Iranian oil exports. The debate between lower or higher oil prices will be resolved in favor of the latter. Oil companies will prosper in this environment not because of new output or higher volumes, but because of much higher prices on existing levels of production. The greens can’t repeal the laws of physics, and the Davos crowd can’t repeal the law of supply and demand. Oil prices are headed higher. Regards, Jim Rickards For Altucher Confidential New Biden Bucks Follow-Up Available Now [Click here for more...]( Hey, it’s Jim Rickards. Since posting my original Biden Bucks presentation online, millions of people have viewed it. Snopes and the Associated Press have even attempted to “fact check” me and claim my warnings are false. Point being, my message has raised a storm and caused a lot of controversy. But in the time between my message and now, a lot of new developments have come to light. That’s why I’ve just released an update to my original prediction… one which will likely be even more controversial. [Click here now to access my new 2023 Biden Bucks follow-up.]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. 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