Disclaimer

Low

Oil Prices

Coming to a Close?

Aramco CEO Warns Of Imminent Oil Supply Crunch

As much as US$1 trillion of investments has either been deferred or canceled with the lower-for-longer oil prices, and this underinvestment will impact the future of energy, Amin Nasser, the chief executive of Saudi Aramco, said on Tuesday. 

In July, Nasser said that if the oil and gas industry didn’t start investing again, the global oil supply/demand curve will reach a turning point in “a couple of years.” 

Due to companies’ continual slashing of investments, global oil discoveries fell to a record low in 2016, and the number of sanctioned conventional oil projects hit their lowest level in more than 70 years, the IEA said in April, warning that the trend could continue this year.

 DYI:

A vary real possibility that DYI has placed into the high probability arena for future escalating oil and gas prices.  Stocks today despite their massive overvaluation continue to remain in nose bleed levels all due to very loose monetary conditions by the Fed that has been made possible by low oil and gas prices.  DYI’s five year oil indicator remains bullish; however as time marches on the low oil effect will wear off and as oil prices begin to move up will cause a deflationary tax effect upon the economy depressing stocks and junk bonds.

  10/1/17

Updated Monthly

Oil Prices: 
10/01/12....$112.25

10/03/17......$51.36   

Down 49%(rounded)
(oil prices approximately five years earlier due to weekends & holidays)
ANS West Coast prices   

 OIL INDICATOR:  Positive  Oil indicator will remain positive until it's rise is greater than 75% from five years earlier.

Oil prices are well known for their volatility in the short term, longer term due to dwindling reserves energy prices are in a secular bull market.  Technologies such as fracking will extend the life of oil fields but major new discoveries arrive at a snails pace far slower than the world's growth.  

As long as prices rise in a slow and orderly pace our economy can adjust to those changes, however if prices spike (international tensions, war etc.) high energy costs behave as a massive deflationary tax. This will send our economy tumbling down and very possibly the U.S. stock market.

*If oil prices rise greater than 75% from five years earlier, investors at that time should shift their portfolio geared towards deflationary times.  This would be an oil indicator as negative.

*If oil prices rise from five years earlier less than 10% or drop then the inflationary play is in effect; a positive for economic growth along with possible higher stock prices.

Where to find five year earlier oil prices?  Alaska Department of Revenue    

Oil indicator positive                 
20%  REIT's
20%  Energy
20%  P.M.'s
40%  Small Caps
  0%  Lt. Gov't Bonds

Oil indicator negative
  5%  REIT's
10%  Energy
10%  P.M's
10%  Small Caps
65%  Lt. Gov't Bonds

Vanguard Funds

REIT's
REIT Index Admiral  VGSLX

Energy
Energy Fund  VGENX

Precious Metals (P.M.'s)
Precious Metals and Mining Fund  VGPMX

Small Caps
Small Cap Value Index Admiral  VSIAX

Long Term Government Bonds
Long-Term Government Bond Index Admiral  VLGSX

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