Published on October 09 2018

The Unthinkable Could Soon Happen in the Oil Market

By Justin Spittler, editor, Casey Daily Dispatch

“Get ready for $100 oil.”

Regular readers might recall that line. I wrote it on July 10.

At the time, it was a bold call.

Oil hasn’t topped $100 since 2014. And a lot of smart people have said that it never will again.

But I had good reason to say we’d see triple-digit oil prices soon.

• Donald Trump is trying to bury Iran’s oil industry…

He’s doing so by imposing stiff economic sanctions.

And that’s a huge deal. As I explained in July:

Iran is a major player in the global oil market.

Last year, it pumped 4.5 million barrels of oil per day. That makes it the world’s fifth-biggest oil producer. So taking Iran out of the equation could seriously disrupt the global oil supply.

In short, I predicted we’d see $100 oil again because the market’s headed for a major supply crunch.

Since then, the price of oil has jumped 7%… and is now just $16 away from topping triple digits.

Not only that, some of the biggest players in the oil industry are now saying the same thing I said three months ago.

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• Mercuria Energy Group expects oil to hit $100 before the end of the year…

Mercuria is one of the world’s biggest commodity trading houses. Last year, it traded 121 million tonnes of crude oil and refined petroleum products.

And it sees oil topping $100 for the same reasons I do. Specifically, it believes economic sanctions on Iran will seriously disrupt the global oil supply.

At a conference in Singapore two weeks ago, Mercuria co-founder and president Daniel Jaeggi said:

The market does not have the supply response for a potential disappearance of 2 million barrels a day in the fourth quarter… In my view, that makes it conceivable to see a price spike north of $100 a barrel.

• The Trafigura Group made a similar call during the same conference…

Trafigura is a competitor of Mercuria.

In Singapore, Ben Luckock, its co-head of oil trading said he expects $90 oil by Christmas and triple-digit oil by early 2019.

And once again, Iran is the reason why. According to Luckock, Iran’s production “is going to be significantly less than it was, and probably lower than most people expected when the sanctions were announced.”

This isn’t something investors can afford to overlook. Still, I know there are a lot of investors out there who can’t imagine seeing $100 oil. So, consider this…

• Total S.A. sees $100 oil on the horizon, too…

Total S.A. is one of the world’s largest oil companies.

And like Mercuria and Trafigura, it expects oil to top the century mark for a simple reason: supply.

Bloomberg reported on September 26:

Chief Executive Officer Patrick Pouyanne sees supportive elements, such as looming sanctions on Iran and disruptions in Venezuela, that are stripping supply from the market and pushing prices back into triple digits for the first time seen since 2014.

The oil market has major supply concerns. And those concerns threaten to push the price of oil much higher.

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• If you haven’t yet, consider betting on higher oil prices…

You can easily do this by buying the United States Oil Fund (USO). This fund tracks the price of West Texas Intermediate (WTI) crude oil.

You may also want to consider investing in oil companies. These companies directly benefit from higher oil prices.

Regards,

Justin Spittler
Seville, Spain
October 9, 2018

P.S. Today, we have another featured interview with John Hunt, Durk Pearson, and Sandy Shaw.

If you’ve been reading the Dispatch, you know John is a doctor, inventor, and entrepreneur. He’s also Doug Casey’s coauthor in the High Ground Series.

Durk Pearson and Sandy Shaw are no slouches, either. Durk triple majored and triple minored at MIT. He worked as a rocket scientist and aerospace physicist for many years, and helped men get to and from the moon alive. His intelligence and knowledge base is one in a billion, which sits atop a sound economic ideology. He has been recognized as “an American Renaissance Man of Science,” and his notable achievements have extended to society in general.

Sandy graduated from UCLA, majoring in chemistry and biology and minoring in math. She’s been extensively interviewed by the mainstream media, including The Wall Street Journal. Her intelligence and knowledge base is phenomenal, which made her the ideal partner for Durk. Together, they coauthored the No. 1 New York Times best-seller Life Extension: A Practical Scientific Approach.

Below, they talk about the real cause of political polarization. We hope you enjoy…

The Turning Off of Learning

John: The internet information delivery system has greatly caused political polarization. What do you think the conservatives and progressives are hearing now in their click-controlled, biofeedback, bias-reinforcing news delivery systems? I occasionally read the Huffington Post because I want to see what they’re saying.

What the Huffington Post calls news seems to be childish “journalists” selectively picking the worst of Trump’s tweets, and then carefully picking a bunch of derogatory tweet responses written by people taking a momentary break from watching the Kardashians. That’s supposedly news now, to those who keep clicking on the same sort of tripe. But if someone can drain the swamp only when the people are distracted by Russia and Melania’s choice of T-shirt, well, I’ll take it, and thank the Huffington Post.

Durk: Indeed, people aren’t noticing it. Reagan was nowhere near as successful. Reagan slowed down the rate of new regulation formation. He didn’t reverse it. Regulations got larger each year, but slower than they did under others. The first person in history that I know of who has reduced regulations overall is Trump. And nobody’s noticing.

Sandy: Reagan tried, but the Democrats had Congress.

Durk: All of this decreasing of regulations under Trump has not involved Congress. Congress has not been a friend of Trump. It’s all involved his use of the executive pen. Things that were foist upon us with the executive pen can be reversed with the executive pen. And the Democrats are finding that out. And I don’t think Trump wants them to realize how far he’s gone and how fast.

Sandy: Well, the average IQ is about 100. That helps.

Durk: They have to adjust the IQ test to keep it at 100. During most of the 20th century, until the 1980s or so, IQ was increasing by a remarkable amount every generation. This is called the Flynn effect. But then, average IQ stopped increasing. And it’s been decreasing for about the past 20 or 30 years. A lot of people thought that this was due to selective breeding.

John: Like the movie Idiocracy.

Durk: Right. College is very expensive, so the college educated are going to have fewer kids. People who are not concerned about college have more kids. That was a theory. According to a report in theProceedings of the National Academy of Sciences of the United States of America, a study performed in Norway didn’t show this to be the case.

Sandy: Norway is not necessarily the same as the U.S.

Durk: But this was done before Norway had a lot of immigrants coming into the doorway and IQs were found to be dropping there. It’s not genetic. It’s environmental.

They thought maybe it was bad nutrition or something. Certainly the Flynn effect in the 20th century was environmental, and widely thought to be mostly due to improved nutrition and perhaps fewer childhood diseases which can cause harmful neuroinflammation.

Sandy: It looks like to us that the educational system is making people dumb. People aren’t getting educated.

John: There’s a big difference between being educated and being schooled.

Durk: It’s more than that. They are being both miseducated and anti-educated. Their learning ability is systematically being turned off. It turns out that unconditional rewards result in shutting off learning in the prefrontal cortex. The prefrontal cortex is the executive part of your brain.

Sandy: Learning is turned off because kids are rewarded whether they learn or not.

Durk: Your brain burns more energy per minute that any other organ in your body, including your heart. Learning is very expensive metabolically. So, if it turns out that a reward is certain, learning is shut off.

John: You don’t want to waste that energy if you’re going to succeed anyway—meaning get that reward.

Sandy: There are a number of studies that have shown this.

Durk: The millennials have been given rewards for just being there. When everybody gets an A, you don’t have to study. When everybody gets a prize or a trophy, that can literally shut off learning.

Sandy: This is not new information. Biologically, if the brain doesn’t need to use up resources to get a reward, it will just take the reward and preserve the resources for other things.

Durk: You have to wonder why the millennials haven’t learned from the Soviet Union and more recently, Venezuela, that socialism is a really bad idea. Why do more millennials like socialism rather than capitalism?

John: Propaganda maybe? But the facts are out there and staring them right in the face. Venezuela is happening now.

Durk: It is. Socialism promises unconditional rewards, though it fails miserably to deliver them. But learning has been shut off. They don’t learn. Their learning has been systematically shut down by unconditional rewards.

Now, the good news, and this is very interesting news that just surprised the heck out of me, it turns out that if the reward isn’t certain, but rather only 90% certain, and there’s a 10% possibility that further learning will get more rewards, learning can be turned back on.

Sandy: And that’s enough incentive for some millennials to excel, even in this current environment.

Durk: So that means it’s not hopeless. It is going to be difficult because, from infancy through college age, it is all unconditional rewards. It’s not until they get out into the real world or they get a job that the rewards start becoming conditional.

Except for one very big thing. People have said video games are a horrible waste of time. But every video game that’s popular is all about conditional rewards. There is a desire built in by evolution for people to learn to be able to do better, to get more resources for themselves, to kill their enemies, etc. And all of these are conditional reward-learning activities. Video games may be what’s keeping learning alive for some millennials. Some of the things they learn from video games, like how to steal cars in Grand Theft Auto, may not be socially desirable, but keeping learning alive is definitely something that’s worthwhile.

Sandy: The people who get hooked on unconditional rewards may become the drug addicts.

John: Is there anything that video games are teaching that is useful?

Durk: One of the most popular video games is Minecraft. You go around, you explore, you prospect, you develop a mine, you buy mining equipment, you mine the stuff. You make money. It is a pro-capitalist game. There are others, like Farmville and Zootopia.

Sandy: But only the more intelligent people are going to be playing those games.

Durk: There’s one where you build rollercoasters and amusement parks. And it’s all about economic calculation. You have to decide whether to invest in a bigger, more expensive rollercoaster that’s more thrilling, or buy a cheaper one and build your business up by the bootstraps, by saving and investing more cautiously.

John: So the skill sets are still available to be used. They’re not being used in most of academia—which isn’t a big shocker—but they’re being used in the free market video games, part of the entertainment sector of the economy.

Durk: Video games are much bigger in terms of annual sales than the movies.

John: Hollywood, for all its progressive confusions, still exports American values globally. They’re anti-gun, but it’s always the guy who finally ends up shooting the really really bad guy that gets the applause in the movie theater. I suspect, but don’t know for sure, that even the gun banners applaud.


Reader Mailbag

Today, a reader responds to yesterday’s Dispatch: “Another Black Market Is Opening Up… And It’s Bigger Than Cannabis”…

All I can say is how disappointed I am in these companies that are pushing to legalize marijuana, then sports betting. This is disgusting! They want to ruin our country by turning everyone into a pothead! Walking around in a fog! Then the gambling?

What are you teaching our children? On one side, they are trying to stop drug trafficking. Then there are these companies pushing marijuana! What is it… they can’t have recreational activities without getting high? Shame on all of them… all for money… how greedy!

—Anonymous

And a couple more readers respond to Doug Casey’s recent interview on the Brett Kavanaugh scandal

Doug—you were spot on. After reading the comments made by some of your readers, all I can say is “did they read the same thing I read?” People just don’t get it, do they? You summed it up when you stated the country is very philosophically polarized at this point. People don’t “think” anymore. They base their opinions on “feelings” and “emotions”… sad. I believe it was Bill Bonner who stated, “People believe far more passionately in things that are not true than in things that are. The unreality of them demands greater loyalty and more faith.”

Thanks for being a leader. We need more MEN to stand up and fight the good fight! Where are they?

—Teresa

I’m at home reading the replies to “Doug Casey on Brett Kavanaugh” and at the same time listening to a local radio station promote a story coming up about President Trump apologizing to Mr. Kavanaugh on behalf of all Americans… Then I hear “stay tuned as we give away free tickets to Bill and Hillary when they appear in person next May.”

Am I the only one to see the hypocrisy in this? Mr. Kavanaugh may be guilty for some high school shenanigans… and the Clintons? I’m sure I recall that Mr. Clinton violated a few women while he was in a high position of authority and Hillary was complicit to them. Men and women can’t wait to be in the Clintons’ presence and pay a hefty price to do so and yet forget about “Monica’s Missiles” and the corrupt Clinton Foundation.

—Zoltan

And as always, if you have any questions or suggestions for the Dispatch, send them to us right here.


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