Oil Heading for Sudden 8% Drop

By Christian DeHaemer (Wealth Daily | Original Link)

There has been a lot of talk about the president and his desire to increase the price of oil and gasoline, and replace it with suddenly competitive energy sources like solar, wind, and twisted rubber bands.

This week, Obama went to the pipeline capital of the world, Cushing, Oklahoma, where he crowed about a new pipeline that neither he nor the federal government had anything to do with.

This is out of character, and dictated by his more politically-savvy advisors.

Think: Bill Clinton.

The one political lesson of the past 40 years is that people don’t like to pay high prices at the pump — and they won’t vote for people who they see as taking money directly out of their pockets once or twice a week.

It could be that the younger generation wants more green energy. And in fact, according to driver’s license records, a record number of young people are forgoing cars altogether.

Bike stocks like Shimano (SHM: BE), and Accell Group (ACGPF: PK) have been moving up slowly over the past five years. The trend is there.

Old People Vote

The cold hard fact is young people don’t vote.

We may reach a point where the majority of voters want high gas prices, but we aren’t there yet.

That means Obama will release the oil from the U.S. Strategic Reserve.

Bill Clinton did it in 2000 after the price per barrel increased from $10 to $40. I remember the general perception being positive both on Main Street and on Wall Street.

The lesser Bush bought it all back at a higher price after 9/11, touting the need for security.

But voters don’t care if we have enough diesel to fill our Abrams Tanks in the event of a Russian invasion…

They want cheap gas. So do corporations.

Sudden Price Drop

Morgan Stanley tells us if Obama was going to release the oil from the U.S. reserve stockpile, it would drop the price 8% within the first two days… and it would be 6% lower within ten.

The price of West Texas Crude is up about 6% this year to $107.07 today. Brent is at $125.02. Natural Gas is at $2.30.

Obama is losing the political oil war — badly.

He very much needs to be seen as “doing something,” regardless of whether it has long-term positive effects.

Releasing oil from the strategic reserve fits the bill.

It will happen.

The best way to play it would be to buy the unhedged airlines (not Southwest), FedEx, or some other transport.

If you like risk, the DTO is the double-short ETF. It will go up twice as much as the price of oil drops.

Do you feel lucky?

Have a great weekend,

Christian DeHaemer
Editor, Wealth Daily

— Wealth Daily

You May Also Like

About the Author: Wealth Daily