Jeff Matthews offers a simple observation about the world's oil market:
There’s Nigeria (10% of U.S. crude oil imports), which is run by a “former military ruler” who was about as “freely elected” as Saddam Hussein back in his glory days of winning 99.9% of the Iraqi vote; along with a whole lot of corrupt government officials each with their hand in the till.
There’s Iraq (5% of U.S. crude oil imports), where things aren’t exactly settled yet.
And then there’s Venezuela (11% of U.S. crude oil imports), which is run by a certifiable Castro-style socialist and a whole lot more corrupt government officials than even Nigeria can come up with.
In July, for example, Venezuela “tax auditors” raided Chevron offices in Maracaibo, seizing boxes of records “to build a case that Chevron and other energy companies owe Venezuela $3 billion in back taxes,” according to Bloomberg. “The raid is part of President Hugo Chavez’s push to squeeze more money out of foreign oil companies…”
Add them all up—Venezuela, Nigeria, Iraq and Ecuador—and you’ll find that more than 25% of daily U.S. oil imports come from countries which are, as the man said, “extremely disfunctional.”
And I’m not even counting Mexico (15% of U.S. crude oil imports), whose corruption and bureaucracy have stifled the state-run oil company’s exploration efforts to the point where Mexico is now an importer of natural gas from the United States.
But this is good news, right? We're not talking Peak Oil here, or a permanent sea change in the suppy-and-demand ratios, or an unquenchable thirst from Asia for the stuff, we're just talking about instability and corruption. We're not talking about Hotelling's Law, which suggests that producers of oil, if they think the price will continue to rise, will pump less today waiting for tomorrow's prices. We're talking about some major oil producing countries that can't produce today because they can't get their act together.
And you definitely shouldn't listen to nonsense like this coming from the Motley Fool. In an article entitled "7 Gas-Proof Stocks" Rick Munarriz recommend buying shares in such turkeys as Overstock, XM, Sirius and other equivalently flimsy plays. Oh, and--surprise!--two of the stocks he recommends happen to be part of the Motley Fool Rule Breakers which you can subsribe to for a modest monthly fee.
Instead of that kind of static thinking, what are the stocks that have been getting really hurt by higher energy costs? These are the ones we wanna find. The ones that have really gotten pummelled.
Along this line, check out the following chart courtesy of the always linked-to Barry Ritholtz:
The chart compares Y-O-Y same store sales growth at Wal-Mart (NYSE: WMT)along with an inverse chart of gas prices, demonstrating, compellingly I think, that there may be some basis to Wal-Mart's excuses for dissapointing on sales. Wal-Mart, by the way, hit a new 52-week low in today's trading.