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This Isn’t Going Away

by | published February 29th, 2012

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.

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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.

Sincerely,

James

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.

Please Note: Kent cannot respond to your comments and questions directly. But he can address them in future alerts... so keep an eye on your inbox. If you have a question about your subscription, please email us directly at customerservice@oilandenergyinvestor.com

  1. michael horswell
    March 1st, 2012 at 00:52 | #1

    Unwatchable due to time lapses in delivery.Get someone onto it,PLEASE.

  2. Stuart Loss
    March 1st, 2012 at 01:07 | #2

    In the promotional material, it was recommended to buy OIL March 30 Call options. They are not included in the portfolio and appear to be heading to worthless status. Any chance that these Mar 30 Calls will have any value? Should we consider buying the later months call options given the July 1st embargo deadline?

  3. eric taylor
    March 1st, 2012 at 21:33 | #3

    Lets not make the same mistake of allowing the same people who blew
    up Iraq, also blow up Iran, which would destabilize Europe all the more.
    The U.S. has been interested in regime change in Iran for an entire
    generation, but this is very bad timing, and the rationale for going
    to war has not been substantiated, again!

  4. Mario Pedini
    March 4th, 2012 at 07:14 | #4

    If the economic situation in Iran is as bad as described, why cant’ they replace the European countries with China or India , for example. I am sure the Chinese could profit from the situation bargaining better prices to assure Iran of a steady inflow of currency

  5. DrTD McGhee
    May 10th, 2012 at 09:29 | #5

    Can u guide me to ur article on Israeli/Cyprus gas,thanks o

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