Find me a law, and I’ll find a loophole.
Check out this chart for the price of West Texas Intermediate crude:
Since the market imploded in 2008, the price of WTI has been in a bull market. It is putting in higher highs and higher lows.
With all the headlines about the “Fracking Revolution,” “American Energy Independence,” and the fact that the “U.S. is Burning Less Oil,” you’d think the price of oil in Texas would be falling.
No so, my good friend.
Here is why…
While it is illegal to export crude oil from U.S. shores, it is possible to export crude that has been refined just one step. And this loophole is just starting to become extremely profitable for a select few companies.
U.S. “Oil” Exports Have Doubled
According to the Energy Information Administration, petroleum-related exports from the U.S. averaged 3.5 million barrels per day last year. Exports swelled to 4.3 million bbl/d in December, marking the first time exports averaged more than four million in a single month. This has more than doubled in the last few years.
Foreign demand is increasing. At the same time, domestic demand is falling, and production is jumping.
According to the Houston Chronicle:
“U.S. refiners are sending a “tidal wave” of gasoline, diesel and other refined products onto the world market, taking advantage of the explosion in domestic oil development that has helped drive Gulf crude stockpiles to record levels, according to a new analysis.
The surge in domestic oil supplies, along with “healthy margins” at the nation’s refineries mean the U.S. is on track to become a net exporter of gasoline — producing more than it needs — next year.”
The average output of 8.9 million barrels per day of gasoline in 2015 will be more than enough to supply U.S. motorists. We only suck down 8.5 million barrels of gas a day, and this has been falling about 6.5% a year.
Refinery Capacity is Up
Meanwhile, refineries are more productive despite the usual springtime maintenance shutdowns. Utilization was at 91% for the latest week, up from 88.8% a week earlier and 83.5% the same time a year ago, EIA data showed.
Valero Energy Corp (NYSE: VLO), a major refinery, has seen its share price go from $35 in September of 2013 to $56.79 today on the increased volume and fatter margins.
The upshot of all these numbers is that the U.S. will send more petroleum and natural gas products overseas.
Vindication is Mine
On March 20, 2014, I wrote an article entitled, “What to Buy for Putin’s War.”
In it, I told you that nickel was used in pipelines, export and storage facilities, as well as LNG transport ships.
Yesterday, the price of nickel hit a 14-month high — but is still only 25% of the highs it hit in 2007.
Nickel is just one way to play the new hydrocarbon market. The other is infrastructure…
The Sure Way to Play Oil Exports
A few years ago, I found an energy infrastructure company to play the fracking boom. Since that time, it has reported 16 straight quarters of double-digit profit growth.
The stock has gone from $10 to $86 over the last five years, and I’ve been talking about it in my free report, “The Ring of Fire,” for almost that long.
The company builds and installs storage tanks for liquids and gases. It makes export facilities and does all manner of petroleum/gas engineering. It is very active on the U.S. Gulf Coast, and its backlog is over $50 billion.
The investment thesis is simple: Buy the oil and natural gas infrastructure companies.
It’s a growth business with no end in sight.
Good hunting,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
