“Energy analysts say the price of oil would start to soar and could rise 50 percent or more within days.” — New York Times
In a development that has edged the world closer to full-scale war in the Persian Gulf, European powers stated Wednesday that a tentative ban would be placed on exports to Iran.
The European announcement comes on the heels of three very publicized long-range missile tests conducted by the Iranians earlier in the week.
It marks an escalation of sanctions against Iran for continuing to pursue a nuclear materials enrichment program which many experts and government officials believe can only be aimed at the production of weapons of mass destruction.
Iranian Navy runs exercises in the Strait of Hormuz
With more than 16% of the world’s oil supply passing through a key shipping lane just two miles wide in certain places, Iran’s threat to blockade the Strait of Hormuz has already met with international outrage.
Some of the worst criticism has come from Iran’s own neighbors, among them the world’s largest oil producers who depend on the Strait of Hormuz for access to the Persian Gulf on a daily basis…
“To close the Strait of Hormuz would be an act of war against the whole world,” said Sadad Ibrahim Al-Husseini, former head of exploration and development at the world’s largest and wealthiest oil company, Saudi Aramco.
“You just can’t play with the global economy and assume that nobody is going to react.”
The response from the U.S. State Department has been no less stern.
In a recent interview, David L. Goldwyn, former State Department coordinator for international energy affairs, said: “If the Iranians chose to use their modest navy and anti-ship missiles to attack allied forces, they would see a probable swift devastation of their naval capability. We would take out their frigates.”
5th Fleet Flagship, USS John C. Stennis, docked in Bahrain
In total, 15.5 million barrels of oil pass through the Strait of Hormuz every day — including crude from Iraq, Kuwait, Qatar, the United Arab Emirates, and Iran itself.
Almost 90% of this daily volume winds up in Asia, with China being the most ravenous consumer by far.
Although some military analysts have dismissed these threats as “empty talk,” Iran does have a history of leveraging international influence by disrupting or outwardly attacking shipping passing through the Strait…
In the 1980s, the Iranian Navy mined the Strait and attacked Kuwaiti tankers hauling Iraqi oil into the Persian Gulf, a move that led the Reagan administration to intervene by escorting and, in some cases, re-designating Kuwaiti ships under the American flag.
A modern repeat of what happened during the Reagan administration, however, would likely lead to far worse consequences.
Given the level of tension in the Persian Gulf, any military engagements would likely lead to widespread hostilities that could disrupt global oil prices in ways not seen since the 1970s Arab Oil Embargoes.
Energy analysts have already predicted a 50%+ jump in oil prices, even if a partial blockade were to be imposed by Iran’s 250-plus vessel navy.
According to Helima Croft of Barclays Capital and Lawrence J. Goldstein of the Energy Policy Research Foundation, such a radical shift in price could send average gas prices past the $4 mark in the space of a few days.
Of course, the problem with situations like this one isn’t so much the disruption in commercial traffic as it is the trickle-down effect of the panic to all levels of business and industry…
Oil price spikes have been blamed for entire recessions, including one that lasted for most of the 1970s when the Arab world closed the valve on U.S. exports in protest of the Yom Kippur War in 1973.
Are we due for another one?
It’s impossible to say what this standoff will lead to in the long term, especially given that the Iranian Government is making no friends in their own region.
What we can say with almost total certainty is that as long as sanctions against Iran are on the table, oil prices will be creeping upward…
As they have been in the last week, since this heightened level of tension took hold:
This could mean one of two things for you as we move further into the winter months…
It could mean higher heating bills, more money spent on gas, more money spent on air travel, even more money spent on food and water, as shipping costs go up across the board.
For a majority of Americans, this is will be the greatest lasting effect of a gradually deteriorating diplomatic climate.
For some, however, an increase in oil prices — during a season when energy costs are already astronomical — is a predicament that spells profit.
You see, thousands of miles away from the Persian Gulf, a brand-new generation of energy companies is laying the groundwork for a massive industrial resurgence, right here on American soil.
Taking advantage of the Bakken Oil Shale formation — a massive crude reserve which remained untouched during the first golden era of American oil — these energy companies represent the vanguard in fossil fuel production.
With at least three decades of upward production on the horizon, North American shale oil will still be growing many years after the Saudis, the Kuwaitis, the Iranians, and everyone else in the region has pumped their last drop.
But don’t wait for OPEC heavyweights to start running dry…
Because while we’re definitely heading in that direction, it won’t happen until the end of the decade (at the earliest).
Instability like the kind we’re seeing escalating in the Persian Gulf at this very moment promises to shift the balance of the oil market back to North America long before the Arab oil empire goes into full-scale decline.
Which means finding tomorrow’s industry leaders right now has never been more important.
Keith Kohl is Angel Publishing’s resident oil industry insider and one of the world’s foremost authorities on oil shale exploration and development.
He has spent the last several months analyzing which of these aggressively-expanding companies presents the best opportunities today.
In his latest special report, Keith has cut this list of dozens down to just three stocks that represent the best in terms of share structure, real estate holdings, production statistics and most importantly, future plans.
To get the full report with detailed explanation and analysis, click here.
Get the latest investment strategies in this week’s articles, below.
Yours in wealth,
Brian is a founding member and President of Angel Publishing. He writes about general investment strategies for Wealth Daily and Energy & Capital. For more on Brian, take a look at his editor’s page.
Energy Investments for 2012: Where to Invest in 2012
Editor Jeff Siegel offers his take on the future of energy investing.
Investing in Oil and Gas Infrastructure: Pipeline Stocks with a Kick
There’s a safer way for investors to find oil profits…
The Gold/Platinum Ratio: Indian Mother-in-Laws Turn to Platinum
Platinum jewelry is expected to make up to 25%-30% of total Indian jewelry sales in 2012. This comes in a market in which total jewelry sales in India are growing about 12% a year.
Oil Price Forecast for 2012: Why I Think Byron Wien is Wrong on Oil
Yesterday legendary market strategist and forecaster Byron Wien released his Top 10 Predictions for the coming year. He went eight for ten last year… a solid reason you should listen to what this guy has to say for 2012.
The Two-Faced God of Money: Old Gods, New Funds, and Doves at the Fed
As ruler of Latium, Janus was said to have invented money and ruled over a golden age. He solved the problem with the Fed in a simple manner: His money wasn’t based on gold, nor on the full faith and credit of Latium, but rather was gold.
U.S. New Top Natural Gas Destination: All Hail the Shale King
The advent of fracturing and the discovery of shale formations mean proven reserves of natural gas could be several times more than once thought.
6 Stocks that Outperformed the Dow in 2011: This Baby Boomer Stock Even Beat McDonald’s
This stock’s performance underscores a major trend that will be here for the next two decades…
Putin Resigns, Gold Goes Down, and More: Putin Out, Poland Up, Brent Jumps
There is support around $1,497 an ounce. If the price falls through that level, we are getting to $1,000 real fast.
Let the Chinese Invasion Continue: Fueling an Energy War
Why China is scrambling to secure its future energy supplies now… while they still can.
International Oil Investments: Put Global Events to Use for You
No one is going to capitalize on the opportunities for you. You have to do it yourself.