Big Oil: The Tech Story No One Is Talking About
Oil production is fraught with geopolitical risk.
Last weekend’s events in Saudi Arabia demonstrated this clearly. The attack — which removed about 5.7 million barrels per day of supply — sent oil prices worldwide spiking by over 10% Monday.
It also sent share prices of many American producers soaring, naturally.
But less than 48 hours later much of oil’s gains Monday were handed back.
Speaking to my colleague and trading expert Greg Guethner, he noted:
“Crude continues to retreat from its highs this morning after Saudi energy minister Prince Abdulaziz bin Salman revealed the kingdom’s oil production would be completely back online by the end of the month.
What appeared to be the biggest oil story in at least a decade is now beginning to look relatively benign. As of early this morning, the market has all but completely absorbed oil’s massive Monday spike.”
I couldn’t agree more.
But the attack, and the way the markets spiked and fell, still teaches us some very important lessons. Even if they’re not the ones we expected.
Newfound American Dominance (Thanks to Technology)
The U.S. is in a better position than most other major oil-consuming countries to weather events in the Middle East.
Things are a mess in the Gulf region, but U.S. gas and oil production have been humming along. The U.S., against all odds, has even become a net exporter of oil.
We can’t emphasize how big a deal this is. Especially when global supply is interrupted to such a degree as it was in Saturday’s attacks.
Big picture, we may be witnessing the slow death of OPEC. Qatar left the cartel last year and many of the remaining nations are inches away from war.
And given the rise in tensions along with other factors mentioned above we think it could only be a matter of time before OPEC crumbles, upending global oil supplies and prices.
The impact of this would be much like the impact of the drone strikes in Saudia Arabia over the weekend, but instead playing out over a much longer time frame and much more significantly upending global energy markets.
It’s All Thanks to Technology
America owes its newfound energy independence to the new technologies coming online over the past decade. These technologies have allowed the extraction of oil from previously untappable resources. These include deeper, harder to find reserves, as well as previously untapped areas like our shale reserves.
And it’s this technology that allows American companies to produce oil up to 3x more efficiently than the Saudis, Iranians or anyone else for that matter.
And that also means there will be dozens of tech-fueled pick and shovels plays that will allow us to profit off this new, and growing trend.
We’ll dive deeper into those ideas next week.
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily