The Peak Oil Myth

[ThatHawaiiGuy]

Prepare Yourself for Higher Gas Prices

Comes with vid:

http://finance.yahoo.com/tech-ticker/article/192391/Prepare-Yourself-for-Higher-Gas-Prices?tickers=VLO,SUN,HES,OIH,XLE

Posted Feb 24, 2009 11:48am EST by Aaron Task in Investing, Commodities


Related: VLO, SUN, HES, OIH, XLE

With the economy tumbling, joblessness rising, and the stock market at 11-year lows, about the only positive thing for Americans' pocketbooks lately has been (relatively) lower gas prices. But this too shall pass, according to James Cordier, president of Liberty Trading Group in Tampa.

Corider, whose firm specializes in selling options on commodities, notes that while oil supplies are at a 16-year high, gasoline inventories are at a 5-year low. So when demand rises with the summer driving season - which he says it will even as many Americans opt for "staycations" - expect prices at the pump to rise 20-30 cents per gallon.

If you're looking for a villain in this scenario, the refiners fit the bill; they have kept capacity idle in anticipation of the coming demand and hope to profit from the widening crack spread - or the difference in price between crude oil and refined products.

Because of tight spreads, refiners fared poorly when oil prices were surging in 2007 and early 2008, Cordier notes; now, they are primed to make hay while the opportunity presents itself.

But rather than rant about "evil" refiners, Cordier is focused on the investing implications of this potential move in gas:

* Go long refining stocks like Valero and Sunoco. (Cordier has no position in either.)

* Sell call options on crude, which is a bearish bet on oil, and sell put options on gasoline, which is a bullish bet. That is how Cordier is positioned and he says individuals with a futures trading account can do the same; profit from a potential rise in gas prices by selling options - not buying them. (You can learn more at OptionSellers.com)

Earlier, we discussed how oil may be primed for a quick climb, but don't fantasize about 2008 highs.