Is Autism Politico talking about motor oil? No. We are talking about crude oil. And before you go on reading this editorial, we’d just like to point out that we don’t give out financial advice. You want to find out about investing and investments, call a broker. What follows is an opinion. Don’t act on it. Consult a financial adviser if you are thinking of investing in anything. We may be wrong, you know.
But guess what? In the past weeks, there has been quite a bit of turmoil in Ivory Coast, Tunisia, Egypt and Yemen. These last two are major oil-producing countries. According to a June 2004 issue of National Geographic, Egypt was producing 274 million barrels per year and had 3.7 billion barrels of proven reserves. Yemen was producing 128 million barrels a year with over 4 billion barrels of proven reserves.
In 2004, according to National Geographic, daily consumption was 80 million barrels a day, and the article came out before China began buying up oil wells and oil fields around the world, and started consuming massive amounts of oil to keep its industry rolling. The Chinese have also gotten into the auto market in a big way – not as producers, but as purchasers. Streets that were once full of pedicabs and bicycles, are now full of cars.
Investing in energy a long time ago would have been a good idea. Even though the market tanked – and energy funds and stocks tanked with the markets – the energy sector has typically rebounded faster, and with greater dividends.
The reason for this is that even if some of the world’s sources for petroleum are as yet undiscovered, there is nevertheless a finite amount of oil on earth, and even though we are developing more fuel-efficient cars, this innovation is offset by the fact that more and more people in developing countries are driving than ever before. So we are quickly using up the precious oil we have left. And since many of the countries that have oil beneath their territories are in political turmoil, access to their production and reserves might strangle us further.
There is going to come a time when people are going to wonder why they are paying so much at the gas pump when the economy is currently so poor and not really improving that fast. They will be thinking that fewer people are driving because fewer people are working, so gas should go down in price instead of up. People are going to wonder why everything they buy costs more, not factoring in how much fuel is consumed to get the products they buy to where they buy them.
It’s because they are myopic, not seeing the world around them, but only what is directly in front of them.
These people will get poor. Or poorer, at any rate. The reason is simple: They will spend more of what they earn to buy what they need, be it food, clothing, or transportation. Businesses won’t sell as much because people will be buying less. People will get fired because there won’t be as much work for them.
But if you had bought into the energy market before all of this turmoil started, you could be selling the oil, or you could be sharing the profits of the companies that drill for the oil, refine it into fuels, and sell it.
Of course, those foolish people who aren’t paying attention to what’s going on in the world will see you as being a greedy, bloodsucking leech, and they will try to raise taxes against you and your capital gains, but just remember that its sour grapes on the part of people who are uneducated and ignorant.
Yes, they will blame you as your bankbook fattens, always failing to take into account that when the price of oil spikes, it seldom goes back to its lowest point before the spike, even when there is a glut of it on the market. If Egypt’s next government turned out to be a ruthless dictatorship, there’s a good chance that this dictatorship would still produce oil, or even increase production to finance itself. The only likely way it would be choked off for the long-term would be if the wells were destroyed during a war, or if the people who ran them left the country.
Venezuelan dictator Hugo Chavez, according to that 2004 NG article, runs a country that produces 834 million barrels of oil per year and sitting on 77.8 billion barrels of proven reserves. And we’re still buying it from him! And people are paying a premium for it because they don’t realize that there is still a huge supply!
But the question Autism Politico asked at the beginning of this entry remains: Did you remember to buy oil?
If not, we wonder why not. Aren’t you better than the common class of men and women? Don’t you have any common sense?
Replies to this editorial are welcome.