My Victory Lap…

We’re gonna take a small victory lap today.

The risk here is that karma steps up, slaps me upside the head, and says, “Never do that again, El Jefe! Just be humble and move along, you little braggart…”

So be it…

The victory we’re lapping has to do with the oil market.

For many a moon now, I’ve been writing here and in my monthly Global Intelligence Letter that the oil market has a big move higher in its future.

The reason: Heavy underinvestment in finding new oil reserves to replace the ever-dwindling fields now in production. Part of that was underinvestment from the late 2010s as Western nations kowtowed to enviro-nazis who wanted all fossil fuel production to end yesterday, damn the global disaster that would create.

Part of it was the funkiness that COVID imposed on the oil market when oil prices plunged to less than $0, literally, as oil companies paid people to take away the oil they had no room to store amid a global economy that had swiftly stopped economy-ing, almost overnight.

At that time, I said buying oil stocks was a no-brainer and that oil prices would soar past $100 on the rebound. And, lo and behold, oil hit $130 in spring 2022. Exxon, which I told my former landlord to buy at under $30 per share and with a yield of 10% (and I’m pretty sure he didn’t listen), is now up nearly fourfold.

Along with underinvestment, ongoing demand outside the West is rising at a pace faster than declining demand in the West.

And both of those factors combined are the fuel for a supply/demand imbalance.

Meaning: Growing demand is running up against a supply shock.

Higher prices are the only outcome because finding, permitting, drilling, and producing new oil wells is not a light-switch kind of endeavor. This is a multi-year process, and that’s assuming normalized investment returned today, and it hasn’t.

All of which is quite bullish for oil investors, though certainly bearish for oil consumers.

The opposing view (let’s call it the wrong view) is that declining demand due to the rise of renewable energy sources will remove the need for oil and, thus, oil prices are doomed.

Silly rabbit…

That might be true in the long run, but the long run is so long we’re all dead by then anyway.

Plus, it’s such a myopically Western perspective… as though the rising middle-class in China, India, Thailand, Malaysia, all of Africa, the Middle East, and South America simply don’t matter in the supply/demand equation.

They matter a great deal.

On a daily basis, the West sucks up about 43% of global oil demand. The non-West: 57%.

Equally important, oil demand is rising faster in the non-West than demand is shrinking in the West.

Or as Goldman Sachs phrased it a few days ago, “peak demand is another decade away, and more importantly, after the decade it takes to peak, it plateaus, rather than sharply declines, for another few years.”

But back to that victory lap…

This is recent commentary from Ken Rogoff, a Harvard prof and the former chief economist at the International Monetary Fund.

When there is an energy shock, it can take a huge price change to clear the market. And the pandemic was the mother of all shocks, bringing about the biggest sustained shift in demand since World War II. In the longer term, energy prices look set to rise unless investment picks up sharply, which seems unlikely given current policy guidance. Supply and demand shocks will most likely continue to roil the energy market and the global economy.

And there you have it: El Jefe’s victory lap.

Rogoff is now voicing exactly what I’ve been laying out for a few years now.

As I regularly point out, the big trends I see are never going to materialize next Thursday. Probably not even next year. Stocks move immediately based on rumor and reported financial results and mergers and Federal Reserve interest-rate actions/commentary and whatnot.

Not so with economics.

The impact from sundry events do not magically appear 7 to 10 business days later.

Like a tsunami, they take time to build before they rip apart some distant shoreline.

It’s like this with currencies, commodities, even societies.

This is why my prediction 12 years ago that the US was heading toward a Red/Blue divide and talk of secession and national divorce took nearly a decade to materialize.

It’s why my prediction more than a dozen years ago that gold, then under $1,000 per ounce, would see $2,000 on its way to $2,500, is only now coming to fruition.

It’s why my assurance in 2012 that China and Russia were building a new, hard-asset-backed reserve currency is only now taking shape in the open.

And it’s why I continually send you Field Notes that explain why bitcoin will see unheard-of prices; why uranium has a big price boom still to come; why the US map will likely change this decade; why a fiscal crisis is coming to America before this decade ends; why silver will see new all-time highs; why the dollar is destined to trade lower over time, particularly against the Swiss franc…

And why oil prices will rise to levels most people would laugh at.

Of course, most people laughed at the Red/Blue divide prediction, the gold prediction, the China/Russia currency prediction, etc. etc. etc.

I had an editor—Gay Miller—in my earliest days as a “Heard on the Street” column writer for the Wall Street Journal. I’d been raised on the idea of objectively reporting the facts, and I was new to this idea of taking a position in a newspaper story. So, I was visibly nervous as she edited a position into one of my stories on a mortgage-banking stock back in the early ’90s.

“Jeff, Jeff, Jeff,” I still hear her saying, “you need to remember that we’re never wrong—just early.”

That is the best advice I can offer you, too.

I’m not saying I am never wrong. Of course I am. Everyone is from time to time.

But on the biggest trends—the trends that play out over years, not days and weeks—my track record has been fairly exemplary over the last 12 or so years.

So, that’s my victory lap.

But before I sign off, a special plea:

Please, karma, allow me this one self-congratulatory butt-slap, and go bother some other braggart. Thank you.