This Isn’t Going Away
Finally, A Clear and Concise Explanation of Oil Prices Today
Dear Oil & Energy Investor:
As you know, Kent’s in Europe right now, advising international stakeholders on the Iranian embargo, rising global crude prices, and growing uncertainties of the European debt markets.
Personally, it’s been almost two years since my last trip to Europe.
In the summer of 2009, with a Hopkins graduate class, I spent a week with German Energy and Environmental ministers and listened to lectures on the challenges of energy security for Europe’s leading economy. Now then. Discussions with European diplomats on energy issue are fascinating, but very intense.
That’s why I’m content this time just asking Kent to bring me back the lousy T-shirt.
Now, you might be curious exactly what Kent is saying to his audience on the other side of the pond. If so, there’s good news.
Just before he left, Kent visited Fox News to discuss rising oil and gasoline prices.
As Fox host Shibani Joshi says, Kent lays out the facts “so clearly and concisely” that anyone can understand what’s going on.
The reality is that CNN, ABC, CNBC, and a host of other networks with “business analysts” are getting it wrong when it comes to a very important question. What are the underlying factors affecting energy prices?
That’s why more and more people are turning to Kent.
And this interview was so compelling that I felt it necessary to use my space today to make sure you see it.
I think it’s the finest explanation of what is happening on the international energy markets today.
And you can watch it right now.
The Great Divide Continues
We’ve experienced an acceleration in the spread between Brent Crude prices and the price of Western Texas Intermediate (WTI) over the past few months.
Brent crude is currently $15 to $20 per barrel higher than WTI. However, geopolitical impacts are playing a greater force in the price of crude. On July 1, when the European embargo against Iranian crude oil goes into effect, that spread is expected to accelerate.
That divide, as Kent says, is going to have an impact on our refining network here in the United States. The U.S refinery network is already at about 92% capacity, and that figure will continue to rise into 2013.
Those refineries that are importing Brent are very susceptible to the rising price, and will likely see their margins impacted well into the summer.
Meanwhile, refineries that have greater access to the glut of oil in the Bakken and Canadian Oil Sands fields are likely to benefit over the short term.
Finding the U.S. Iranian Connection
The big question about Iran is how exactly the actions of the exporter can affect prices here in the United States. After all, the United States and Iran have very poor relations, and we do not source oil supplies from that nation.
But as Kent states, “this is an international, integrated oil market.” Europe feels the brunt of price increases first. And as oil prices rise on the international market, prices will rise here, too.
“Even though we are not directly dependent upon Iranian oil, we are still dependent on the price differential between London (where Brent Crude is priced) and New York.”
But there are additional concerns for not just the U.S. economy, but also a European one that continues to fight off threats to the future of the EU experiment. As prices accelerate and supply issues continue to plague an energy-starved world, the nations that are most dependent on Iranian crude will likely suffer as they attempt to find new sources of fuel.
Debt-Plagued Nations Are Most at Risk
Only 11 of the 27 EU nations import oil from Iran. However, three of those importers are countries we continue to see in the headlines, as the EU debt crisis rears its head every few months.
Front and center, Greece and Italy. Greece gets 30% to 40% of its crude from Iran. And Italy is not far behind.
Given that energy is a primary underlying driver of economic growth, the European Union does not know how it is going to compensate for the loss in Iranian oil. And that is what makes this game of “chicken” so dangerous moving forward.
The European Union will not be able to stop Iran’s nuclear program (whether it’s peaceful or not), barring a military escalation. But as Kent said just before he left, these rising crude prices have Europe finally realizing that they need a comprehensive energy plan moving forward – and one that is not so reliant on hostile nations.
Hopefully, the United States learns this lesson as well, as prices at the pump swell to record levels.
P.S. This spread between Brent prices and WTI prices is the biggest trend in the energy markets today. And Kent has been all over this story for months. In fact, his Energy Advantage subscribers are already profiting, which probably helps ease the pain to their wallets every time they pull into the gas station.
His research is still available, and it won’t take much money to make huge gains in the coming months. To see Kent’s latest research, go here now.