The Oil Crisis Is Far From Over
The stock market is extremely focused on the price of oil right now.
Fighting in the Middle East made oil prices skyrocket a few weeks ago.
And the price has been swinging widely based on how the fighting is going.
Why is the price of oil so important?
Around 34% of the world’s energy comes from oil.
So when the price rises, especially so dramatically, it causes a lot of problems.
People are spending more money on heating their homes and driving their cars.
Businesses are paying more to transport their products to consumers.
It’s a mess.
Thankfully, the price of oil has calmed down a bit.
It reached a high of $120 on March 9, but recently the price has been hovering between $90 and $100.
Unfortunately, there was some bad news last week and it’s getting overlooked by the markets.
You probably don’t know who Roland Lescure is.
I certainly didn’t.
He’s the current Finance Minister of France and he raised major alarms in a press conference last Wednesday.
According to Lescure, between 30 and 40% of the oil refining capacity in the Middle East has been damaged or destroyed in the fighting.
It amounts to about 11 million barrels of oil per day not making it to market.
Here’s an article highlighting the press conference.
It could take years for oil infrastructure to get rebuilt.
Honestly, it’s terrible news for investors and our economy.
But it’s largely getting overlooked with oil prices staying right around $100.
Below are some stocks which could make a lot of money in the crisis.
All of the damaged or destroyed infrastructure in the Middle East will need to be rebuilt or repaired.
Halliburton (ticker: HAL) is the world’s largest publicly traded oil services company.
Halliburton sells products and services to oil producers to help get oil out of the ground, and some of those services include construction.
Its stock price is up more than 50% over the past 6 months, but there’s more room to grow.
Especially if countries in the Middle East need help rebuilding their infrastructure.
And while Halliburton’s price has been zooming, it’s not really expensive.
Halliburton’s current price-to-book ratio is 3.2x, which is below its historical average.
Similar to Halliburton, Baker Hughes (ticker: BKR) is in the oil services industry.
However, Baker Hughes focuses more on equipment and technology rather than actual construction.
Also, over 70% of Baker Hughes’ revenue comes from outside the US, so it has more international exposure.
And Baker Hughes’ industry-leading 14.5% return on equity (ROE) shows the company knows how to make money.
The last pick might seem crazy, but hear me out.
Rising oil prices are bad for a lot of people, but it can also be bad for the oil industry, especially in the long-term.
High oil prices will make a lot of people and businesses think twice about using oil as their primary source of energy.
It’s why I like Tesla (ticker: TSLA), the popular electric vehicle (EV) manufacturer run by Elon Musk.
Demand for Tesla’s vehicles will rise when gas prices stay high, but Tesla is more than just EVs.
The company is investing a huge amount of money into batteries, which are critical for the future development of renewable energy.
And Tesla’s stock is down 25% since its highs in December, so now is a great time to buy at a lower price.
What do you think is going to happen to the price of oil?
Coach Parker
Category: Commodities, Stocks
