Oil – U.S. State Department’s Newest Ally

Who knew that oil, once the pariah of the western world, would have such a positive role in the Obama’ Administration. Senator Clinton couldn’t have asked for a better ally. Oil is bringing America’s strongest enemies to their knees and reminding Europe why Russia isn’t such a great neighbor after all.

As prices have recently touched lows of $33.20 per barrel, inexpensive oil has caused severe problems for Venezuela’s Hugo Chavez and Iran’s President Mahmoud Ahmadinejad. Chavez just invited oil companies Chevron (NYSE: CVX), Royal Dutch Shell (NYSE: RDS.A) and Total S.A. (NYSE: TOT) back into the country. And Ahmadinejad is fighting re-election troubles caused by a government used to surpluses and excess cash.

Apparently inefficient state-run energy companies can’t squeeze out profits like the professionals. And when they aren’t screwing production up, Russia has proven that it can simultaneously show the world it’s a bully – in addition to cutting off it’s income stream. 

And things certainly don’t seem to be getting any better for these three. OPEC just released its 2009 demand forecast that spells out a dismal outlook for the coming year. But it’s not just low demand.

Oil inventories are at all time highs, “contango” opportunities abound, and OPEC hasn’t cut production anywhere near to where it needs to be to level out prices. And even if it did, the “bad boys,” mentioned above, would still be pumping it out at full speed to meet their obligations.

Lets fact it, oil could be down for much longer than they expect. 

Companies mentioned in this article: CVX, RDS.A and TOT.

• OPEC: Lots of Oil, No Power
• Is Oil Ready to Skyrocket?
• Crude Oil Prices: The Best Way to Play the Coming Oil Rebound

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One Response to “U.S. State Department’s Newest Ally – Oil”

1. Dan Finn Says:
   January 23rd, 2009 at 1:05 am

   Best move USA could make now is buy the cheap oil and add it to the USA Strategic Petroleum Reserve. This would add a stabilizing affect to stave deflation somewhat by propping this asset which is so relative to all other assets in the world. Yes, it helps the above-mentioned three USA enemies, but helps the USA and the rest of the world, too. Future USA Strategy could then include opening the domestic valve on the built-up reserve against future oil spikes.

   Reply

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