$97 Oil... Now What?
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- Published on Wednesday, 22 August 2012 14:36
- Written by Andrew Snyder, Editorial Director, Insiders Strategy Group
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There is much more to investing in energy than today's oil price. The smart money is focused on tomorrow's prices.
With just 75 days until the election, surging oil prices are a nightmare for Team Obama.
Most Americans can see through the lies and deception of a heated campaign. They can ignore the half-truths from unaccountable PACs. Voters tend to forget the unfilled promises and the contradictory speeches.
But force them to shell out an extra eight bucks for a tank of gas... oh my... that's an unforgivable sin.
High oil prices are hell on a politician's career -- especially when they're rising on fears that Israel is trigger-happy.
But what's it mean for investors? What's the very best thing you can do to take advantage of rising prices?
To answer those questions... we turn to some valuable advice I sent you on May 24.
If I had to make one investment for the next 20 years... I'd buy shares of Royal Dutch Shell (RDS:NYSE).
To be sure, buying just one stock is a preposterous notion. Few folks ever get rich -- and stay that way -- rolling the dice on a single stock. I'd much rather own some timber, some gold, a farm and a chunk of a few other strong companies.
But put a gun to my head and tell me to choose... I'd choose Shell.
I'd give the same advice today... even without the gun. Shell is a global energy beast, and its stance is only getting bigger.
Here's what the chart looks like since I wrote the piece:
Shell's global dominance allowed it to surge by nearly twice the rate of the S&P 500 and its closest competitor, Exxon Mobil (XOM:NYSE). It even beat Apache (APA:NYSE) in the midst of a quick surge in natural gas prices.
Why?
Shell does something far better than any other company on the planet. It takes advantage of Unconventional Wealth's fifth core tenet... The world is flat.
Exxon is good at spreading its operations. But Shell is great.
Take China, for instance.
Late last year, I made headlines when I said China's huge supply of unconventional gas would ruin America's plans to become a giant LNG exporter. Within a day of releasing my article, I had calls from several international news outlets looking for an interview.
The crux of my argument was a series of quiet moves and drill results from Shell.
But now, nine months later... the moves are far from covert.
From Reuters on Tuesday:
Royal Dutch Shell plans to spend at least $1 billionpera year exploiting China's potentially vast resources of shale gas, the firm's top China executive said, part of an aggressive strategy to expand in the world's biggest energy market.
Shell in March secured China's first product-sharing contract for shale gas, hoping that getting in early will allow it to be a big beneficiary from the sort of boom in shale that has transformed the U.S. energy market.
Shell is working overtime to tap what is now believed to be the world's largest supply of unconventional gas. And to help get the job done, the giant is working on another record-breaking project... a $12 billion refinery in eastern China.
But one big investment does not create a global beast.
To help accomplish that goal (beyond gas exploration in Qatar... offshore drilling in Africa... and coal-seam gas production in Australia's interior), Shell just announced a fresh stake in a $30 billion liquid natural gas (LNG) deal.
In this deal, Shell trades interest in two gas and oil fields off Australia's coast, but it also buys a 27% stake in the country's Browse LNG project -- a vital part of Australia's plan to become the world's largest LNG exporter within seven years.
My point is simple.
Shell is anything but conventional. Instead of sticking with what it knows and does well, it is working to create the future of global energy.
And it wisely understands that natural gas will reign.
But here's the thing. It's what I repeat over and over. America is not the king of gas.
Yeah, we have a lot of it. I get it. I really do.
But China has a lot of gas. So does Australia. So does most of Africa. Same goes for Poland. Russia. Qatar. And Saudi Arabia.
You could follow the herd and take a stake in a go-nowhere gamble like Cheniere Energy (LNG:NYSE)... but you're setting yourself up for disappointment.
By the time America gets its energy ducks in a row (or until the poor things die of starvation), China will have access to plenty of natural gas of its own.
That's the beauty of understanding the idea that the "world is flat." While Obama and his campaign advisors work to keep oil prices from rising too high before November, smart investors flee the day-to-day political risk.
They shun the mess spewing from Washington. They avoid the uncertainty of an energy policy that swings with the polls. And they stray from the blind masses.
And as they do... they're making a lot of money.
Editor's Note: There's a disturbing secret Obama isn't telling you. Congress is hiding a dark secret that could soon devastate millions of retirement-seeking Americans. One leading financial magazine refers to this event as "a time bomb." In short, if your money is connected in ANY way to the stock market. Learn all of the eye-opening details here.
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