Over this New Year's weekend, I mused about India and China increasing their national petroleum reserves and about Israel, Iran, and $150 oil...
Here's a Reuters headline and first sentence from this morning:
Oil above $110 on Iran, China Data
Crude oil rose above $110 a barrel on Tuesday as tension between Iran and the United States stirred fear of a possible disruption to oil supplies from the Middle East and as Chinese data showed economic activity increasing.
That price was for Brent, U.S. crude was up over $102.
And the news is only getting more interesting, with the rhetoric — both governmental and media — only getting stronger.
We're starting to see phrases like “cut off oil exports from the region” and “shut the Strait.”
The Ayatollah's have warned they'll “take action” if U.S. aircraft carriers return to the Gulf.
Iranian Army Chief Maj. Gen. Ataollah Salehi told the world:
The Islamic Republic of Iran will not repeat its warning... the enemy's carrier has been moved to the Sea of Oman because of our drill. I recommend and emphasize to the American carrier not to return to the Persian Gulf. I advise, recommend and warn them over the return of this carrier to the Persian Gulf because we are not in the habit of warning more than once.
In the past week, Iran has produced its first nuclear fuel rod and test-fired two long-range missiles.
France is urging the rest of Europe to join the United States in imposing sanctions such as an embargo on Iranian oil exports and a freeze on its central bank assets.
Dog and Pony
On the financial side, at least, no one's buying it.
I saw a representative from an international Swiss consultancy call it “a public relations show.” The term “saber-rattling” has become hackneyed in three days' time.
But Strait blockage or not... Nuclear tit-for-tat with Israel or not... Embargo or not..
Only one thing is certain and real:
As the same Swiss consultant said, whether they have teeth or not: “In this environment of increasing tensions and rhetoric, global asset managers are unlikely to give up their long exposure to oil.”
It isn't like we haven't seen this show over and over for the past three decades.
The first thing I did this morning after seeing the Iran news was click over to my brokerage account. My investment in Transocean (NYSE: RIG) was up nearly 4% in premarket — almost as high as the Dow went up all of last year.
And Transcocean wasn't alone...
Major oil companies with market caps half a billion or higher were making similar or bigger moves.
Owning a simple oil ETF like the ProShares Ultra DJ-AIG (NYSE: UCO) would've made you more than 7% richer already this year.
This isn't brain-racking, intensely-researched, needle-in-a-haystack stuff; this is political unrest in oil's most fertile region driving up the commodity's price — and therefore, the value of companies that operate in that sector.
And you should be putting it to use for your bottom line.
Think about your goals...
Are you running for office? Are you the head of an NGO? Are you the chairman of an international non-profit with billion-dollar resources?
If you responded "no" to all those questions (I certainly did), then you needn't take an ideological stand on the issue.
Forget the water cooler chat about how crazy Ahmadinejad is.
Quell that inner monologue debating U.S. policy on Israel.
Unless that stuff has a direct bearing on your day-to-day life and finances, it's a mere distraction.
Always wear your investor's hat.
And always be thinking not of the outcomes and intricacies of international and domestic events, but of how you can put them to financial use for you. And then act on them.
You would've enrolled in a 2%-3% dividend program that far beats the return on many other “safe” investments out there.
No one is going to capitalize on the opportunities for you...
You have to do it yourself.
International Oil Investments originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.