The Alternative to Being Held Hostage by Oil-rich Countries
Friday, December 16th, 2011
By George Leong, B.Comm. for Profit Confidential
Oil prices continue to be largely dictated by the folks in the Middle East. And, unless we see a massive flow of new oil from the controversial tar sands in Alberta, Canada, and a move back to offshore drilling in the post-BP era, oil prices will continue to be dictated by OPEC. I think it’s wrong to be held hostage by a group of oil-rich countries.
On Wednesday, oil cartel OPEC and its 11 member countries raised the production ceiling for its group to 30 million barrels a day in an effort to adjust for the increased output from post-Gaddafi Libya. The increase was in line with the 30.37 million barrels a day produced in November. The group decided that oil prices of $100.00 a barrel was reasonable and $80.00 was viewed as the low point that was acceptable for oil prices. This might be fine with OPEC, as it adds to their coffers; but with the average price of gasoline at $3.28 a barrel, consumers aren’t happy with these oil prices.
The government must continue to look at ways to reduce the country’s insatiable appetite for oil and reduce the impact of high oil prices on the economy.
Oil magnate T. Boone Pickens has long pushed his view to cut the country’s reliance on foreign oil. He is investing heavily in alternative energies such as natural gas and wind-powered energy generation.
President Obama knows this and has increased government spending to foster less dependence on fossil fuels and to cut oil prices. The government has spent about $2.7 billion in stimulus to try to get the electric vehicle (EV) market going. And, with the high price of gasoline, I expect the demand for pure electric or hybrid vehicles to continue to grow.
There are estimated to have been 30.6 million EVs sold in 2011 worldwide and this is expected to rise to 51.3 million EVs by 2021, according to IDTechEx.In the U.S., the Obama administration has set a goal of one million EVs on the road by 2015. This is a nice start, but the focus must continue, especially if the election in 2012 results in a new president and party.
A play on the rising demand for EVs and other electric-dependent applications is AeroVironment, Inc. (NASDAQ/AVAV), based in Monrovia, CA. Founded in 1971, AeroVironment operates in two key segments: Efficient Energy Systems (EES); and electric-powered Unmanned Aircraft Systems (UAS).
The real intriguing thing about AeroVironment is its EES segment, which includes the EV charging solutions area. This is comprised of home charging, public charging, fast charging, data collection, grid-integrated communications, training, and support services. Clients include consumers, automakers, utilities, government agencies, and businesses. The charging systems are currently used in 25 states.
An important milestone for the EV unit was the company being selected by Washington State to develop and install a network of nine fast-charging stations for advanced EVs known along parts of the I-5 between Canada and Everett, WA, which are known as Washington’s electric highways. I feel this could expand to other states. The end result would be clean energy and reduced impact from high oil prices.
Clearly, there is plenty of long-term potential here and it appears that AeroVironment at on the forefront of this development.
At the top of my list for technology stocks continues to be Apple (NASDAQ/AAPL), as the company gets ready for a big holiday shopping season that promises to have “iPads” and “iPhones” on many shopping lists. You can see what makes me excited with regard to Apple in Apple Is Shining Bright…RIM, Not So Much.
Next Post: What Happens When the Money Runs Out?Previous Post: What’s Next for Hard-hit Investor Sentiment?
Tags: market view, oil prices, oil stocks, U.S. economy
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
