Buy Oil Now, Thank Me Later

“This is a disgrace. Just look at what I have to pay today.”

That’s the sentiment I was met with as I patiently filled up my tank this morning. The guy filling up his puke-green Grand Cherokee Trackhawk next to me was feeling the pain as each drop of gasoline poured into his tank.

Normally, I would sympathize with the guy. 

When you buy a car that gets 13 miles to the gallon, however, sometimes you have to own your mistakes. 

While he continued to grumble beside me, lamenting high gas prices, I found myself wondering how he didn’t see it coming.

The answer is that we’re spoiled. 

You, me, the poor guy burning a hole in his wallet a few feet away earlier, and everyone else in the United States. 

It’s true, we’re spoiled on cheap energy. 

So how did we get here? 

And more importantly, how bad will it get as we barrel our way into 2022?

The Downside of $80 Oil: Pain at the Pump

Right now, the current average price for gasoline in the U.S. is $3.28 per gallon — the highest it’s been since 2014. 

My young friend at the pump, who looked barely old enough to drink, has been filling his tank for the last seven years without realizing why it was so cheap. 

It’s a shock most Americans are going to get from here on out too.

You see, people have become so accustomed to cheap oil that they’ve forgotten what the other side was like. 

As you can see below, most younger drivers are used to cheap gas:

And contrary to what the media tell you, there’s absolutely nothing President Biden can do about it. 

What’s the president’s plan? Apparently, he’s going to ask OPEC+ to pump more oil into the market. The problem is that OPEC+ is perfectly content to stick to its planned production increase. 

More supply will push crude prices lower, which means gasoline prices will drop like a stone, right?

Ask OPEC members whether or not they want lower oil prices, and their answer is a resounding “No!”

Last year, OPEC generated about $323 billion in net oil export revenue. 

That’s the lowest it’s been in decades. 

No, there won’t be any relief coming from the oil cartel. 

And make no mistake, that’s good news for us.

Here’s why…

Oil’s Fundamental Reckoning: Too Little, Too Late

I told you back in February that the most unexpected rally in 2021 will be in the oil sector. 

It was also one of the easiest calls to make throughout my career. 

And it all comes down to the fundamentals.

You know just as well as I do that when it comes to U.S. domestic oil production, tight oil is king. 

Today, tight oil production from five plays accounts for 70% of our oil output. 

Let that sink in for a moment.

Yet these tight oil wells come with a few issues — one of the biggest of which is that they experience very sharp decline rates. 

In other words, you have to drill hard and fast to keep the crude flowing.

So far, drillers have managed to get by through boosting efficiency. However, we can’t ignore the simple fact that we’re not drilling enough. 

Don’t believe me? Just take a look at the latest Baker Hughes rig count, which shows that there are 433 rigs drilling for crude oil right now inside the United States. 

To put a little perspective on that, there were around 1,600 oil rigs in the field this time of year in 2014.

That’s what happens when oil prices fall. 

On the one hand, the flood of supply that hit the market in the years preceding COVID allowed us to enjoy cheap prices at the pump.

Now we’re paying the piper for it. 

Watching WTI prices break above $80 per barrel recently, it’s only a matter of time until we see crude test $90. 

There’s no quick fix this time. 

And that’s good news for us.

Why?

Because we know exactly which companies are going to help balance the fundamentals going forward.

Here’s a spoiler: It’s not going to be OPEC+.

Next week, we’ll break things down and I’ll show you which drillers you want to have on your radar as we head into 2022.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.