Oil: What You Should Know
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Did we learn anything from last years speculation bubble when oil reached $114 a barrel based on the fear that the Arab Spring would disrupt oil supplies? I just read an article that blames Iran and China for our current increase in gas prices. Maybe the media should take a little of the blame.
The other night on the national news it was a big story how Iran had cut off oil to England and France. The story also disussed how high gas prices have gone up and how high they might go. They didn't bother telling the national audience that the embargo slated to start on July 1st was going to do the same thing anyway. Nor did they bother to tell us that England only imported 1% and France 3% of there oil from Iran and that their two major oil companies BP (NYSE: BP) in England and Total (NYSE: TOT) in France already stopped importing from them! This latest speculation bubble is based on all the saber rattling being done about disrupting the oil flow in the Gulf if Iran's nuclear sites are bombed.
There is no shortage of oil. There is no disruption in supply. This is an election year where the incumbent president wants to get re-elected badly. The only way Israel can bomb anything in Iran is if they have access to the United States refueling air tankers. Now tell me do you think that before an election when every 25 cent increase in gasoline sucks out 35 billion dollars out of discretionary spending that anything is going to happen before the election?
It is simple. Do your investment research and when everyone is running around screaming the sky is falling select an oil drilling company like Seadrill (NYSE: SDRL) trading near its 52 week high with a p/e of 10 that has the capabilities to drill at deeper ocean depths than it's competitors. Or maybe an oil service company like Halliburton (NYSE: HAL) that is trading at $38 off its 52 week high of $57 with a p/e of about 12 with growth increase expected from its international operations. So instead of complaining about the rising cost of oil invest in companies that will help your wealth grow.
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