The Choke Point Worth $200 Oil

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The Choke Point Worth $200 Oil By Keith Kohl | Tuesday, September 18th, 2012 Go big or go home. At least Iran's latest motto regarding oil prices is  straightforward. We've always known Iran to be one of OPEC's more avid price hawks. Years ago, when crude was trading for $40, they wanted $60. When it rose to $60, they wanted $80. When it broke above $80? You got it — nothing short of $100 was satisfactory. Now that the cost for a barrel of Brent crude is around $113 per barrel, it turns out $150 is the lowest acceptable price, according to an Iranian oil minister. Can we really blame them for demanding exorbitantly high prices for crude? Iran's domestic production is at 20-year lows, and sanctions have lowered July exports by an estimated 45%. With oil trading relatively flat since mid-August, perhaps we should have expected more saber rattling from them. Advertisement Is Obama Terrified of the "Secret $200 Retirement Blueprint?" If you've already retired, or want to retire soon, I urge you to watch this video presentation before we have to pull it down. This "Secret $200 Retirement Blueprint" shows you step-by-step how to grow a monster-sized nest egg with a little time and a tiny grubstake. Click here to watch this video presentation now.  The Choke Point Worth $200 a Barrel What will it take for oil to spike as high as $200? The answer lies with a tiny strip of waterway just 21 miles wide at its narrowest point. Every day, roughly one-third of the world's seaborne oil shipments pass through the Strait of Hormuz — not to mention the more than two million barrels of LNG also traveling through the passage. And while we've heard these threats time and again over the last few years (really, decades), attempts to stir the pot and drive crude prices higher have really started to spook some of the world's largest producers. Both Saudi Arabia and the UAE are bypassing the Strait as much as possible... to the point of opening up new pipelines to offer the countries more flexibility in getting their barrels to market. China won't be taking Iran's threat lightly, either; half of their daily oil imports travel through the Strait of Hormuz. Should the U.S. be worried? After all, with our own domestic production booming and the reliability of the three million barrels of Canadian oil flowing daily into the lower 48 states, is the fate of the Strait a real concern? Well that depends on the answer to this question: Are we out of the woods when it comes to depending on Middle East for oil? Advertisement Obama's Solar Blunder Cost Taxpayers More Than a Half Billion Dollars! Now meet the completely ignored solar company that didn't take a dime of your tax dollars... But could eliminate your electric bill using a ground-breaking technology. Click here for the full story.  Our Middle East Oil Grab Before you answer that question, take a closer look at our imports. If we are truly freeing ourselves from the shackles of Middle East oil, we're doing a very poor job of it.   In fact, we're doing the exact opposite... Our imports from Iraq, Saudi Arabia, and Kuwait are actually heading higher: Country 2011 Imports Average 2012 Imports +/- Change Saudi Arabia 1.19 million bbls/d 1.45 million bbls/d +21.8% Iraq 459,000 bbls/d 461,000 bbls/d +0.5% Kuwait 191,000 bbls/d 326,000 bbls/d +70% Tried and True Oil Profits What's in store for oil in this next chapter of the price story? Will we finally see it spike above $200? Truthfully, we won't be seeing those price levels without a full-blown conflict erupting on Iranian soil. At a certain point, demand destruction steps in. The fact that our reliance on Middle East oil is increasing means we aren't as insulated from foreign oil as our election-seeking candidates would have us believe... but we also can't overlook the success in domestic production. Here in the United States, where WTI is trading at a near-$17 discount to Brent crude, domestic production is at a 14-year high (which will inevitably rise as oil companies continue developing our unconventional resources). And when it comes to investing in our domestic boom, the best opportunities aren't from the big names you see plastered across media banners... I'm referring to the major international oil companies like ExxonMobil, BP, and Chevron, to name a few, that dominate headlines. Even though Exxon trades with a $423 billion market cap, its performance hardly excites potential buyers. Why? For starters, they're almost always late to the party. Had you bought shares of ExxonMobil in the beginning of 2008, you'd be sitting on nothing right now. Compare that with just one of the leading North Dakota producers — Continental Resources — trading with a market cap slightly below $15 billion: As Big Oil is being squeezed out of the world's largest oil fields by the domineering NOCs, they're left with one course of action... They have to spend their way out. Over the next few years, the oil majors will be paying top dollar to scoop up smaller companies drilling in all the right places — making these three oil stocks under $10 sorely undervalued and ripe for acquisition. Until next time, Keith Kohl @KeithKohl1 on Twitter A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.   I liked this article | I did not like this article Follow Energy and Capital on The Bottom Line Related Articles When OPEC Fails... Venezuela Production May Fall Short Unconventional Energy Investments ConocoPhillips (NYSE: COP) Interested in Chinese Shale Gas Recently... Energy and Capital's Weekend Edition Lessons from the Indiana Gas Boom Don't Fall for THIS Solar Scam All Roads Lead to Gold Unavoidable Crisis about to Strike Riyadh

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