High Oil Prices Mean Profiting From this Kind of Play

oil pricesWith the outlook for the U.S. and global economies looking more encouraging, we have seen a corresponding upward push by oil prices on the chart.

The April WTI Oil is advancing higher at above $108.00 and north of its 50-day moving average (MA) of $100.35 and 200-day MA of $95.86. A bullish golden cross is holding, with the 50-day MA above the 200-day MA.

An issue for us is that a large part of oil prices continues to be largely dictated by the folks in the Middle East, namely the 11-member cartel Organization of the Petroleum Exporting Companies (OPEC), which as a group help to decide what oil should be priced around. At this time, OPEC feels that oil prices of $100.00 a barrel are reasonable and $80.00 is viewed as the low point that is acceptable for oil prices. This might be fine with OPEC, as it adds to their rich coffers, but with the average price of gasoline at $3.48 a barrel, consumers aren’t happy with these high oil prices.

 But 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.


 The U.S. had agreed to allow oil from the tar sands delivered to refineries in Texas, but the deal is currently on the burner after the government, subject to pressure, decided that a different route from Canada was needed. The tar sands have long been viewed as oil riches, but the process to retrieve the oil is not considered environmentally friendly. Europe at this time is looking at placing the tar oil on the no-go list.

 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 on creating less dependence on fossil fuels and has 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 be 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 of EVs and other electric-dependent applications is Monrovia, CA-based AeroVironment, Inc. (NASDAQ/AVAV). 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. 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 is at the forefront of this development.

 Let’s cut our dependence on foreign oil and the resulting high oil prices, specifically the oil from OPEC. Why make them richer?

 Consumers are beginning to spend more, but you still need to be careful in buying retail stocks, as I discussed in How to Make Money with Retail Stocks Right Now.