The wildfire spreading across the Middle East is capturing all of the headlines in recent weeks. Country by country, people are taking to the streets in opposition of long-standing authoritarian rule. It almost seems like each country is trying to out-do the previous one. Currently, Libya is at the forefront in the most violent protests seen yet.
All of this has sent the price of oil way up (with some analysts predicting $200/barrel), which in turn sent oil stocks up. The rest of the market actually sold off for the most part amid all of the uncertainty. One of the most interesting observations is that the US dollar didn't strengthen like you normally see in times of crisis/shock. This comes back to our core theme of long-term dollar devaluation. Real, tangible goods are the best bet when currency is being destroyed. While recent events are clearly more of a supply side shock, it is all part of the same story. Hopefully, peace ensues and prices stabilize (Americans don't need $4 gasoline right now....although it will be far higher in the future), but our portfolios should be structured to gain from higher prices....much higher.
All of this brings up another very valuable point. Why are we still dependent on foreign oil? Well, the truth is because it is still cheaper for the most part. But times like this open our eyes to the plethora of other options we have and the benefits they will one day provide. Specifically, natural gas is abundant in the US, prices are low, and we have the means to implement the infrastructure across the country. We are huge advocates of the Picken's Plan and we hope this oil price spike reinvigorates the debate. We also have been watching (and investing) in companies that will hugely benefit from a conversion to natural gas. It keeps money at home, it creates jobs, and it's better for the environment. We shall see how this story develops.
Times of crisis are also times of opportunity!
Sean Kelly
