Every time oil begins to spike, the boom / bust cycle is completed. You should realize by the price action at the pump that the good times will be ending. It is ironic that the last few years have been anything but good. We experienced the pandemic, the continuing collapse of small businesses, another outbreak of senseless, mass shootings, inflation and looming, the prospect of stagflation or even worse, nuclear war.
We, at Evolution have continually sang the meme to End the Fed! They have destroyed the dollar, our standard of living and if the banks become distressed due to their rate hikes, you will see whose corner that they are really behind. Clue: It is not us. Keep in mind, they do not count oil in their phony, manipulated inflation formula. Our outlook on oil says things will get worse. We begin...
How much oil does the...
global community need on a daily basis? It is a nice round figure. It is 100 million barrels per day. Do we need a 100 million new computers on a daily basis? Yet, computers are in the Fed's formula and oil is not as well as housing and food. The US needs 19.6 mbs per day. China is the second largest consumer at 12.7 mbs per day. India is third at 4.4 and Japan is fourth at 4 mbs per day. Quess who is fifth? Russia. The Energy Information Administration (EIA) says world use grows by 1.1 mbs per day on a yearly basis. Now, the US also needs to refine oil to gasoline. We have multiple problems here. There is maintenance. There is seasonal blends and the biggest, not enough capacity to cover demand. High prices will only get higher. We will have to live with the way things are until electric vehicles becomes popular. There will never be another refinery built in the US. We only get more debt by importing refined oil. The US should seek to build even more oil reserve tanks. We should also seek to build food reserve banks too. The stimulus to build the infrastructure to build-out electric charging stations is a good use for a future need. It will also help the climate / environment.
Russian / Ukraine War
has disrupted the global community. The EU should have started to breakaway from Russian oil supply years ago. The elite idiots like the ones at Davos have a conviction if the communist and third world nations saw a rising middle-class that they would never seek conflict. This thinking of the New World Order (NWO) is behind the shrinking of the middle-class in America. They are now sleeping on the street and their work is to go to a food pantry for a handout. Rising oil will multiply that problem. It could lead to civil unrest, but we are getting ahead of ourselves.
When sanctions stopped Russia from selling their 10 mbs per day, the world had a huge peroblem. Where do we get that much production? The true answer is it cannot. As a result, we get oil inflation. Russia sells its 10 mbs to China. The only positive is China does not buy from suppliers like Mexico and Canada. Their oil does fill some of the gap. We already know from COVID that the US as well as the global community will consume less oil to avoid inflation. During the pandemic the US used 9 mbs less per day. Some of the reasons are sad like loss of a job or worse, death.
What is happening now with oil is it is looking for its valued price. There is also a speculation price. That is the dangerous one. We can see this from last Friday's close on the oil contract. It dropped by over 6% or $7.26. Don't be fooled! The trendline for US crude has been up since it sold for $33.64 a barrel in Octomber 2020. It is the same story for BRENT except you can go back further to April 2020. The price has gone straight up and that was before the conflict that rages today.
Oil firms are selling at their highs. The two US giants (Exxon and Chevron) reached all-time highs. We do not recommend a purchase. There will be big price swings due to news. With that said, oil will pierce the $127 price and it should test the all-time high of $147. When it does, the word recession will be dropped due to the worse possible economic outlook: Stagflation will be here. As you know, we rarely recommend a stock because if it does poorly, we cannot sleep at night. Nevertheless, we feel that RIG at less than $4 per share has great value. Oil is not going anywhere because of electric cars and technology. At these high prices, oil firms will dig and under-water has the biggest finds. This is what Transocean (RIG) does. We also recommend with warm weather to use a bike. You save on gas. You get healthy and in shape. Peace.
