Looking forward, it is difficult to find a valid answer to the critical question "How do we grow our future supply of Oil?" Right there, for me, I have an investment theme. So resist the urge to abandon the Oil investment theme. Rather, look through the noise at the recent improvements and formulate a game plan. That investment plan by the way should now include Natural Gas.That's correct: the most hated commodity of 2009, Natural Gas. Bad news folks, the projections for the 2010 winter are looking 10% colder than the prior ten year average. That translates into working off the massive oversupply of Natural Gas rather quickly. This week on CNBC, President Clinton correctly identified Natural Gas as the "bridge fuel". On Fast Money last Wednesday night, I had the opportunity to spend time with PG&E CEO Peter Darbee. He supported the concept that Natural Gas is the answer as a vehicle replacement fuel. In fact, PG&E has one of the largest R&D labs in the country and Natural Gas is one of their focuses right now.
Back to Oil. I am convinced the UN September meetings should be aired on Comedy Central next year. Our friends in Iran certainly see the world in a rather comically opposite way than you and I. For the next few weeks, the topic de jour will be Iran. There is a serious situation brewing that certainly does not help answer my "How to grow our future supply of Oil" question. Beyond Iran, the short term thinkers pointing toward a plunge in Oil prices are looking past the improving fundamentals. I suggest they look forward.
Chinese oil demand is now back above its Lehman collapse levels. Other Emerging economies are approaching those levels and should surpass in Q4. If Chairman Bernanke is correct and the recession has ended, then Q4 becomes a period of expansion in the global economy. That initial stage of expansion historically includes a dramatic increase in Oil demand. US domestic demand was impressively resilient in the historically weak month of August, I suspect the months of October, November and December will provide similar surprises, placing September in the "one off" camp.