But I’m really excited about energy in 2024.
In fact, I’ve been bullish on energy for a while – but the past 12 months have admittedly been a wild ride. After treading water for the first half of 2023, oil’s price had a nice move higher from July through September… only to come right back down to where it was at the beginning of the year.
Oil’s fall back to the $70-$75 range is really pretty astounding when you consider everything going on in the world.
Not only is the U.S. economy doing fairly well, but economies around the world are pretty much in lockstep with the U.S. The numbers are a little bit different – some are hotter, some are colder – but there’s certainly no global recession.
With economies expanding around the globe, we’re seeing growing demand for energy. And OPEC has made it very clear that it wants to see higher prices, and it’s going to do what it can to accomplish that. So supply will likely become more and more limited…
And yet the price of oil has come down.
It’s really quite confounding, especially considering the volatile geopolitical climate we’re living in.
The last time I checked, the world was not getting any saner. You have a dictator in Russia who could become completely unhinged at any moment (if he isn’t already). And then you’ve got what’s going on in Israel and Gaza, which could certainly explode into something bigger involving Iran or even the entire Middle East.
So there’s a lot of stuff out there that could cause the oil supply to get cut off or constrained in a very, very big way.
When it comes to the future of the U.S. energy sector, though, there’s one thing that’s far more important than the global economy, OPEC’s production cuts or geopolitics: the Strategic Petroleum Reserve (SPR).
You may know the U.S. has a reserve of oil that’s supposed to be for emergencies. Well, in 2022 and early in 2023, when prices at the pump were spiking to an average of over $5 a gallon, the president released some of those reserves to increase supply and help reduce energy prices.
But that’s created a huge problem: We have almost no oil left in the SPR – just 17 days’ worth, to be exact.
That means one small disruption – whether it’s more OPEC cuts, another reckless move by Putin, an expansion of the Israel-Hamas conflict or something else entirely – could prove catastrophic and shoot oil prices higher than ever before.
And I don’t expect this situation to go away anytime soon. The U.S. secretary of energy admits that it may take years to refill the SPR… even in the face of numerous global threats.
And a recent Bloomberg article reported, “[Refilling the SPR] will take decades, if it happens at all.”
So here’s the bottom line: Supply is constrained, demand is strong, the energy sector is dirt cheap and President Biden has dug us into a hole we could be stuck in for decades.
To me, that all spells what should be a big move for oil and oil stocks over the coming year.
I believe we’ll see oil prices hit all-time highs in 2024. If you haven’t begun preparing yet, I recommend you start today.