Say bye-bye to cheap oil

Say bye-bye to cheap oil

Surplus capacity is history. The jolts will start with $3 gas pump prices.

Despite the recent minuscule drop in gasoline prices, some forecasters believe prices will soon head back up and could crest at $3 a gallon by Labor Day — well past the point, experts say, when even oblivious Americans, and their elected representatives, start to pay attention.

Many motorists and some opportunistic politicians will reflexively point the finger at greedy oil companies and nefarious “foreigners.” But eventually, all of us, from the man in the Oval Office on down, may be forced to concede that the days of cheap oil are over and that the U.S. really does need an entirely new approach to energy.

I have a bit of a nest egg, and when the Dot Com bubble burst a few years back, I spent several weeks researching stocks, and then put most of it into high yield, deeply boring dividend stocks. And there that money has sat for a couple of years now. Most of this little basket of stocks are either companies in the mortgage business or in oil/gas. You’ve probably never heard of any of them. One of them, Nordic-American Tanker (NAT) is now at 24, and even with the big rise in the stock price this year, the yield is 20%. Yes, 20%. When oil prices spike, so do the rates for the three tankers they lease.

Bob, you cry, you sleazy hypocrite. You’re a Green, you drive a Prius, and you have stocks in oil tanker companies? Well, uh, yeah. My crummy couple hundred shares aren’t going to make or break anything, and I parked the money there thinking maybe I’d get a slow boring rise in the stock along with a dividend that, at the time, was about 13%.

But now these once deeply boring oil/gas stocks are soaring in value AND the dividend is increasing. Which should tell us all something unsettling about the state of the oil business today. Demand is rising, especially now with China industrializing so fast, while supply is dropping – in part due to Iraq being offline due to Bush’s invasion, and also because they just aren’t finding new sources of oil. Plus, of course, oil companies are greedy pigs, so prices may well spike higher – then stay there.

PS The tankers NAT owns are double-hulled Suezmax tankers, which, as someone said, makes them the closest to an environmental play you’ll find in oil tankers. So there!