Will Trump pulling out of the Iran deal affect crude oil prices?
Transcript:
A look at this year to date chart, you were talking about the start for equities, itās been a rough start for the year for crude oil as well by all accounts. Traders who told me that their supposed was 25 earlier in the session today now are saying itās more like $22 a barrel and even those who think that our oil will stabilize later on in the year say it will get worse before it gets better.
David: What difference did 24 months make? When we last did a show about oil, the oil industry was in its deepest downturns since the 1990s but today, oil prices are at four year highs. That means that oil is once again a very hot topic but from an entirely different reason from what it was two years ago. Question becomes are rising oil prices a good thing or a bad thing? Will they continue to rise? And what does it mean for the economy and everyday investors? It is once again time to tune out the hype and focus on the faces, facts that matter to you, the income generation.
David: Hello. Iām David Scranton. Two years ago, we did a show on this topic and at that time, the price of a barrel of oil was less than $30 and itās fallen by over more than 60% over the previous 18 months. Meanwhile, the stock market was coming off one of its worst yearās Januaryās in history. This year, the stock market had one of its best Januaryās in history followed by one of its worst Februaryās. But meanwhile, oil prices have risen to almost $70 a barrel for the first time in 4 years. So, whatās behind the boom? And will it continue? And more importantly, how might the answer to that impact the economy, the financial markets and investors in the income generation like you and me? Weāll get to the bottom of all that today with the help of our special guest. But first, letās talk about some key issues affecting oil prices right now and probably in the short term future. As you might recall, one of the chief reasons for plunging oil prices two years ago was that we had a glut, a surplus of oil. Oil reserves were at capacity and the global economy was still in slow recovery mode. In other words, supply far outweighed the demand and as anyone with basic understanding of economics knows, that means low prices but that has changed pretty significantly from 2 years ago. For the most part, in the area of the surplus, you see, those big surpluses of crude that created a glot between 2014 and 20-6 have largely been worked off and in the process, suppliers have been able to raise prices because the global economy has also picked up somewhat and therefore, demand has increased. According to one report, demand has spiked by more than 5 million barrels per day in the last 3 years and global crude consumption is expected at the top 100 million barrels per day for the first time later this year. Think about that. 100 million barrels a day, itās a lot of oil. Now, at the same time, OPEC and Russia have cut their oil supplies, tightening the market further. So, if demand continues to increase and the reserves continue to dwindle, the question becomes will OPEC and Russia look into their supply cuts? Thatās a really good question and most analysts think the answer is No. Moscow has expressed some concern about rising prices stimulating rival suppliers such as, you know, letās say Shale Market. But in the end, both Russia and OPEC probably have more to gain right now than to loose by keeping their cuts in place and let the oil price really continue. And if it does continue, is that a good thing or bad thing for the economy global markets? Again, thatās a really good question. And the answer, unfortunately, is not simple. Itās highly dependent upon many factors. Weāll talk more about some of those factors later in the show with our guest but for now, keep in mind the point I made on last weekās show about the current state of the economy and the global markets. With the federal reserves still trying to unwind 6 years of experimental economic stimulus, a new tax code in place and the stock marketās Ā volatility index set at all time highs or pretty close to it, weāre dealing with unprecedented levels of uncertainty in the financial world. That makes a lot of questions difficult to answer including all of those related to rising oil prices. And as we just pointed out, the rally weāve seen since 2016 is a result of huge surplus reserves being eventually sold off as the demand has somewhat risen and is somewhat improving economy. The biggest factor, of course, is the sell off of the demand but with overall inflation, which Iāll discuss more later on in the show, there comes a point when rising prices become prohibitive and start to slow economic growth. Businesses that rely on transportation, for example, such as airlines and shipping companies can begin to struggle when oil prices cut too deeply into their bottom line. Oil refineries are also susceptible to lower profit margins when prices get too high. And of course, higher fuel bills can also produce the discretionary income of consumers like you and me. So, with the oil rally so far, it seems to have been mostly celebrated as a sign of economic progress. But even though thatās the case, analysts are watching certain factors very closely. Factors that could now cause demand to outplay supply and jack prices up even further to that crippling level. Not surprisingly most of those factors are geopolitical in nature. You know, the oil market always watches the political realm very closely for potential risks of supply disruptions. Right now, you donāt need me to tell you that there are quite a few of them potentially on the rising. The most pressing is the possibility, of course, of President Trump making good on his threat to withdraw, withdraw for example from the Iran nuclear deal and reimpose sanctions on its oil exports. Heās expected to make a decision on the issue by May 12th. Another issue is the economic and political crisis in Venezuela for example which has already caused oil output to fall by at least, 500 thousand barrels per day. And there are similar crisis in both Yemen and of course, Libya, that can lead to supply disruptions. In fact, one senior oil analyst recently told the financial times that geopolitical risks in the oil market were āas high as he could rememberā but on the flip side of all this analysts are also closely watching factors that might potentially offset the supply threats posed by all these conflicts abroad. For example, oil prices wavered on April 30th in response to data which showed that the number of active US rugs drilling oil rose by 5, the previous week, from 820 to 825. That could signal a rise in domestic oil production which could help keep demand from outpacing supply too quickly and by too much. By some estimates, higher US oil production is actually needed regardless of any geopolitical threats. Why? Because global production is already too low. In other words, most analysts donāt see any factors in place that might reverse the oil rally. Some of you even argue that fuel prices continue to rise, the economic benefits for the US will outweigh the potential threats but how so? And what are the real chances that oil prices will in fact, continue to climb? Weāll talk about that in just a bit. But first, letās welcome our guest, Dan Eberhart. Dan is CEO of Canary, one of the largest privately owned oil field services companies in the United States. Heās been a consultant to the energy industry in North America, Asia and Africa and his commentaries appear in Forbes and many other publications. Heās a frequent guest on Fox News, CNBC and other top networks and the author of acclaimed book, The Switch, Americaās global energy renaissance. Dan, welcome to the show.
Dan: Thank you for having me.
David: Youāre very welcome. So, oil prices came back up over $50 a barrel, now picking close to 70, is that mostly a good thing or a bad thing in your opinion?
Dan: I think itās a good thing for the oil and gas business but I think if they go too much higher, itās going to have negative implications for the overall economy. Such as growth and stuff.
David: And why is that?
Dan: Thereās a certain point when it starts impacting capital investments and it starts to hurt consumerās spending and I think weāre near a tipping point, you know, I think somewhere around $75 a barrel is where we hit that tipping point that it starts actually being, well, continues to be good for the oil and gas industry but gas negative implications for consumers and capital investment and the overall economic growth.
David: So, weāre getting reasonably close to that and I know youāve written a lot about the fact that, in your Ā mind, geopolitical risks are some of the biggest risks facing the oil industry today. Are those the things that you think are most likely to push us up potentially over $75 a barrel? And if so, which of those concern you most?
Dan: Sure. So, yeah. I think itās been a relatively quiet 3 or 4 year period as fear as geopolitical tension, shooting was, refineries being, you know, harmed or attached and just geopolitical uncertainty in general. I think thatās really ending right now. Youāve got, you know, production in Angola is falling massively, youāve got production in Venezuela thatās dropping precipitously and then youāve got this looming Iran deal that Trump may or may not pull out of on May 12 and then, youāve also got the Russia situation with all these sanctions and then finally, thereās the kind of proxy war between Saudi Arabia and Iran and Yemen. And I think, you know, any one of these factors and especially is thereās two, three or four happening at one time could really send oil spiking, not out of control but pretty high.
David: Which would you say are the top 2 of those that would affect us adversely to the greatest extent as a country?
Dan: Sure. I think oil is going to move, you know, $5 up or $5 down when Trump announces a decision. I think on the Iran deal, I think thatās about half price in, I also think thereās very big implications in Venezuela and I think thatās going to happen soon. Their production is about 2.2 million barrels a day in 2016, itās right now about 1.6 million barrels and Iām looking for that to fall to around a million barrels a day by the end of the year and I think that thatās going to have, create, you know, Ā thereās going to be a lot of unrest and potentially, a regime change in Venezuela and I think that could affect the oil market but also, a lot of other things.
David: What would have to happen to push oil prices, do you think, over $100 a barrel? Would all these geopolitical risks have to occur in real life at the same time or what?
Dan: I mean, not all of them and the Venezuela and production falling and the Angola production falling and thatās a fact thatās happening. I think in escalation in Syria that pitted the US against either Iran or Russia or both in an act of shooting war, I think that would be tremendous and I think of something happened between Iran and Saudi Arabia, that would also be pretty, you know, pretty precipitous to push oil higher. But again, I think, even as a guy in the oil and gas industry, you know, $60 oil is great, $70 oil is great, $80 is great but I really, you know, $100 oil is really bad for us too, I donātā¦ because it creates a lot of problems. I kind of hope it doesnāt get there.
David: I hope your $75 a barrel production ends up panning out. That would be a really good scenario. We take a commercial break right now, Dan, please stay with us, we have a lot more, in fact, weāll talk when we get back about the effects of increased US production and how that may or may not offset and to what extent it might offset this. So, you stay with us right now, weāll be right back with more words of wisdom from Dan Eberhart.
David: If youāre part of the income generation, chances are that you remember the gasolines of the the 1970s which were resolved to have oil crisis triggered by an OPEC embargo. And by the of it, the price of a barrel of oil had tripled globally and in the United States, prices went up even more. Thankfully, weāve come a long way since then in terms of decreasing our dependence on foreign oil. Gone are the days when the US has to import 12 million barrels of crude oil and finished products per day. Back then, high oil price were definitely an enormous drag on the US economy. But would that situation be the same today, even if oil prices were to continue rising? Would prices inevitably create the kind of tipping point we talked about where they became prohibitive and out the brakes on economic progress? Well, the prospect of this worrisome economies. Other analysts have argued it doesnāt necessarily have to play out that way when you factor in trade. Consider this message from the Energy Information administration which explains how oil impacts the US trade deficit.
āCrude oil and petroleum products play a significant roles in the balance of US trade accounts. United States has historically imported more petroleum and petroleum products than it has exported. The trade deficit reached a maximum of $452 billion in the third quarter of 2008 as a result of sharp run-up in prices.ā
A lot has changed in the last ten years. Although, United States is still a net oil importer, itās net imports have fallen sharply. At the same time, at 2011, the United States actually became a net exporter of finished products such as diesel and gasoline for the first time since 1949. Exports of finished products have continued to increase ever since, rising from 4.7 million barrels per day in 2016 to an estimated 5.1 million barrels per day last year. And as a result, higher oil prices have actually helped increase out trade surplus on finished petroleum products. While that isnāt yet true of petroleum imports and exports total, when theyāre all factored in, the situation does seem to be moving in the right direction. To put it simply, if the US were ultimately to become a net exporter of crude and petroleum products in total as it is now with finished products, then higher oil prices will pump more money into the US economy. As some analysts see it, we could eventually be in a similar position to that of many OPEC nations with the net benefit to our economy for more higher oil prices. Again, that isnāt the case right now so, thereās still this concern over the potential negative impacts of oil prices spiraling out of control. But some of the same factors working to offset that possibility also bold well for the possibility of the US becoming a net exporter in the future. One is that US production is increasing and large part, because President Trump is a very oil friendly president. He carried the vote in the three top oil producing states in the country, Texas, North Dakota and Alaska and in all but four of the top 25 oil producing states in the country also. All these states like higher oil prices. And already rising oil prices along with deregulation by President Trump have allowed the United States shale oil production to rebound from its 2016 decline. In fact, US shale is outpacing growth expectations with total US output expected to expand by about 1.4 million barrels a day this year or a full 10%. And as mentioned earlier, the number of active US oil drilling rigs increased recently. But if higher oil prices are expanding our own oil industry and side of economic growth, then the question becomes why has Wall Street had such a rocky start to the year inspire of this oil boom? While oil prices gain, nearly, 13% in the first four months of the year, the stock market had its worse start with second quarter since the Great Depression and it remains highly volatile. Part of the reason is something Iāve discussed mushy times on the show. As a result of quantitative easing itās after effects, there is still a fundamental disconnect between stock market performance and economic fundamentals. Another reason has to do with speculators and the way oil is traded in the futureās market. Bankers say that a lot of the money coming in to oil now is from speculators looking to cash in on so-called late cycle assets such as commodities. These were thought to do well of course to the end of s king cycle overall market growth. In other words, investors taking a long position on oil right now may be year another sign that the stock market as a whole has maxed out and is ready for another prolonged major correction. Finally, investors are already worried about rising interest rates and general inflation as we discussed on last weekās show may see rising oil prices as just one more part of a broader threat. While oil isnāt included in the consumer price index, the CPI, oil prices often create a domino effect as companies that rely on their oil, such as airlines, pass the increase in to customers and remember that the over value stock market is heavily dependent upon President Trumpās promise of a sustained GDP growth rate of 4%, which most economists as well as the Federal reserve itself are skeptical as even possible, even the best case scenario. Now, at the possibility of rising oil prices is another potential threat to that goal, and itās easy to understand why Wall Streetās been so rocky in spite of the oil rally and with so many uncertainties in place, I donāt see that rockiness changing anytime soon. Now, itās time to welcome back Dan Eberhart, CEO of Canary oil. So, ok. United States has increased its production, I know weāve gotten to a point where we actually now are a net exporter of petroleum finished products, how much do you see thus increase being able to prevent some of the potential for an oil crisis such as we saw back in the 1970s?
Dan: Sure. So, I think that actually, whatās going to happen is the worldwide demand growth is going to increase about a million and five barrels a day and I think in 2018 and I think the US production is actually going to increase by fairly similar amount so, I really think the surging US oil production is really kind of a swap for the increased oil demand growth and I think all these other geopolitical risks that I mentioned before the break, are really potentially a catalyst for oil to spike, you know, much higher than where it is now.
David: So, can we as a country get to the point where we have the right trade balance with oil in total, where weāre exporting more that weāre importing or a bare minimum self sufficient?
Dan: Sure. I think that weāre very much headed there, you know, oil exports have been reaching and approaching 2 million barrels a day so, from a standing start of zero two and a half years ago, itās really quite impressive that weāve been able to do that. I think that for us to export more than 3 million barrels a day, I think thereās got to be a lot more infrastructure, I think weāre running out of take away capacity so, pipelines and West Texas and I think we need more port facilities for the off take in the kind of Texas, Louisiana and Gold Cost area to boost the production above 3 million barrels a day but I think that, you know, Iāve always thought energy independence is a bit of a misnomer, I think we need to be able to trade certain grades of crude with Canada, certain grades of crude with Mexico but, you know, our refineries are hungry and we want to operate the refineries at a 100% capacity so, I think that we will always be importing some of the heavier stuff from Mexico and I think theyāll be taking some of our lighter crude and I think that youāll see some swaps around the Canadians border and I think that just makes sense. But the surging US production really does limit our kind of natural security risk a lot from where it was like in the 1970s, for instance.
David: Sure. Absolutely. Now, do you think what President Trump at helm, at least for a little bit longer, may be longer than that, do you think tht will help us in terms of boosting our own production in this country?
Dan: Yeah. I think Trump has been a friend of oil and gas industry and a friend of business. I think heās made several steps that are positive towards the development of using American oil and gas, unleashing American energy and I expect them to continue to do. So, I think itās a net positive for the industry unlike the kind of regulatory climate and regulatory restrictions and the stalling of the keystone pipelines in some of these kind of initiatives that came out of the abominable restrictions.
David: So, in 30 seconds we have left, all these trade war talk, is that a big concern also in this, Ive the next year?
Dan: Yes. Itās a big concern for me. Iām against the terrorist and I think that itās actually a hindrance to American manufacturing and I also think itās a hindrance to the US oil and gas business which has to compete against West African oil and OPEC oil and others and so, I would really rather than not happen. I do think that Trump administration now is bold in a way that Obama just wouldnāt pick up, you know, wouldnāt pick up the phone and wouldnāt pick up the tempo on trying to fight China on trade, I think Trumpās doing the right thing by trying to get them to the table and get something settled.
David: Yeah. Heās not a person shy of negotiation, we all know that. Coming up in just a bit, weāll talk more with Dan Eberhart all about oil and energy in the markets. Stay tuned and weāll be right back on The Income Generation.
David: So, in light of all the worries on Wall Street and the uncertainty in the Middle East, the question becomes āWill oil prices continue to rise or is this fear overblown?ā Well, as we have fears about inflation overall and rising interest rates, I believe thatās somewhat overblown but I also believer theyāll continue to have a real impact on the financial markets, regardless. And weāll talk more about that in just bit. But right now, letās talk about some of the factors that I believe will help stabilize oil prices. One for example has to do with the economic progress that has helped increase oil demand so far and the fact that itās expected to slow down and ultimately level off over the next couple of years. Again, most Economists are skeptical that President Trumpās promise on the sustained 3-4% of the GDP growth is even possible even when considering the effects of his tax cuts in place. As former Treasury Secretary, Larry Summers, said in an interview just last week,
āYes, we are growing at a reasonably rapid rate but itās taking unsustainable fiscal deficits (in credit and asset prices) to drive us to that point. You can always generate a sugar high. The real problem for us is not achieving growth, but achieving healthy growth with a financial environment thatās sustainable.ā
And as we discussed last week, even as the Federal Reserve has forecast GDP growth no higher than two and a half percent over the next two years, and predicted a cool down to under 2% after 2020, they are also looking for inflation overall to stabilize at around 2%. The problem with forecast of inflation and growth beyond those levels, of course, is that they donāt factor in some important details. The idea of President Trumpās tax cut as an inflation driver is a perfect example. Those are based upon the assumption that because Americans have more money in their paychecks, theyāre automatically going to spend it on goods and services, increasing demand and driving up prices but that assumption overlooks a very important factor. The nationās largest demographic is the income generation. And ever since getting burnt by two major stock market crashes in the last 18 years, they have been more focused on saving and paying off debts than spending. I believe that factor alone with the deficit quantitative easing abroad and a lot of other factors is going to go a long way towards limiting growth along with inflation and long term interest rates and if economic progress has been a factor in the oil rally, then when that progress levels off, It instills the reason that oil prices will too. In fact, many oil market experts believe the turning point will come by the end of 2018. As Tom Kloza, the oil price information service told NBC News recently, āIt changes when you get to the end of 2018. We think prices in 2019 – for crude, for gasoline, will be lower.ā Jerry Ovbawa of the Peterson Institute for International Economics agreed predicting that OPEC Nations might try pushing prices as high as $80 a barrel but will hit strong resistance there by the end of the year. So, if all of that proves to be accurate, does it mean Wall Street will breathe a sigh of relief? Does it mean the extreme volatility at risk of the major correction weāve experienced since early February will decrease and the stock martlet might even regain its upward momentum? Well, anythingās possible, of course, but in this case, I think itās unlikely and weāll explain why thatās true in just a bit. Ok, weāre back with Dan Eberhart of Canary Oil.
David: Dan, what are your thoughts the market, the stock market and whatās happening today, you know, how much of this volatility weāve seen over the last 3 months has to do with oil prices whether directly or indirectly?
Dan: Sure. So, I think that the oil price in the market would have been more correlated than historically but I think it has more to do with the kind of macroeconomic growth numbers and then, the trade, you know, the trade, I will say scupper at this point, I think weāre a little short of a trade war but that kind of belly costs talk and coming out of the Trump administration about trade has got more to do with it than oil prices for the past couple of months.
David: Now, the concern is always inflation and I know youāre kind of eluded to this and right now, the market seems to be afraid of inflation. So, is that kind of where you peg that $75 a barrel number thinking that if we get much over that, it could be an inflation trigger and that might be negative for the markets in general?
Dan: Yeah. No, I think thatās exactly right. I think weāre going to see labor inflation and I think weāre likely to see other types of inflation too and I think thatās going to push oil higher as oil price in dollars and I think that that, eventually, will have a cooling effect on the economic growth of the overall economy and also cool some of the eeriness in the SNB 500 down too as well which, obviously, affects the market.
David: About alternative energy sources, you know, thereās always a lot of talk about them, are they increasing at a rapid rate or are they taking a bigger percentage of our countryās energy need it is that kind of leveled off because prices have been low for a while and weāve gotten complacent?
Dan: Sure. Well, to some degree, I think that itās, the returns arenāt there from the way that we analyze stuff but I think that a lot, you know, I think solar is difficult to make work economically without subsidies, I think wind has got a better economic case, I think weāre going to see increased adoption of electric vehicles as we move forward, you know, three years, five years, ten years out but I donāt see that dampening the demand and growth for oil until we got something like year ten in the future.
David: So, tell us about your book. The Switch: Americaās Global Renaissance.
Dan: Sure. So, it basically talks about how US shale has changed, the way we look for oil, the way we find oil and whatās going to happen and it kind of was right there on the press biz before the downturn happened and it, you know, I donāt think the timing is not completely correct but basically, it predicts kind of what actually happened with there being too much supply that causes prices to collapse. In the book, you know, I think itās a good kind of airplane read and it explains energy. What I found that people find most interesting about The Switch is where we talk about how oil relates to natural gas, relates to coal, relates to electricity and how that mixes together and I think thatās got some good reviews and people enjoy kind of more learning about all how those are puzzle pieces that fit together in our National Energy great.
David: I think youāre right. A lot of people really donāt fully understand that and I probably donāt either, frankly, how they all integrate with each other. So, you said itās an airplane read which, of course, is my favorite, I love being able to read a book in 2-3 hours. So, if you were talking to our viewers, The Income Generation members, baby boomers, either retired or within ten years of retirement, in thirty seconds here, so what is it theyāre going to get out of this thatās going to help them better prepare for their retirement by reading the book?
Dan: Sure. Well, I think theyāre going to get better understanding of the energy market place and a better understanding of where to invest within the energy space in terms of LLPs, exploration and production companies and service companies and then, a little bit understanding ok, whatās behind electricity? Well, itās some coal, itās some nuclear and itās some natural gas and how all that mix works together.
David: So, basically, how to manage the energy sector of their portfolio in a better way by looking forward.
Dan: Yes.
David: Great. Great. Dan, thatās very good. I really appreciate it and tell our viewers where they can find your book.
Dan: Sure. So, itās on Amazon and also, Iād say you can follow me on Twitter @Dankeberhart.
David: Alright. On twitter and Amazon. Dan, thanks so much for coming to the show today, thank you. I appreciate it, itās good spending time with you.
Dan: Thanks. Thanks for having me.
David: And you stay with us too, weāll be right back with a lot more here on the income generation. Stay with us.
David: As I pointed out a number of times right here on the income generation, the financial markets are driven primarily by emotion. Specifically emotions of fear and greed. And Ben though emotion is a reaction to something, as opposed to the real thing itself, emotions have real impacts and real consequences in the financial markets and as a result, they can have real impacts on your portfolio. Whatās happening now with oil price is a real thing, obviously, driven by real factors that weāve discussed. Demand has increased and supply is doing the least reserves have been sold off at increasingly higher prices and OPEC has cut production. All of that has helped US production for oil actually increase and one can argue that so far, al if those redevelopments have been positive. But theyāve also triggers some negative emotional impacts namely: Fear. Many investors and Wall Street analysts have long oil prices with their overall concerns about inflation and therefore, high interest rates and their potential to stall or even reverse economic progress. Now doubt they have memories of 2008 when higher oil and gas prices were one of the factors blamed for tipping the economic into a recession. The important point for everyday investors is that even if all these fears all overblown, their impact on the markets remain very real. In other words, I believe Wall Street will continue to respond dramatically to the new prospects of high inflation, rising interest rates and rising oil prices. Based on the negative economic impacts that they could have, the fear itself is what could continue to drive market volatility regardless of any real economic impact and thatās exactly how emotion Ā creates real consequences in the financial market. If enough people even only say that something is a big deal, whether its interest rates or rising oil prices, then it becomes a big deal. Right now, itās my pleasure to welcome back my favorite financial adviser from Medling, Texas, who just so happens to have s new book coming out here in the next couple of months, thatās Dee Carter of the Carter Financial Group. Dee, welcome to the show.
Dee: Good to be back with you, Dave. Look forward to it.
David: So, I want to talk to you first about oil because youāre right in the thick of things there in Middlein, Texas and then, weāll talk a little bit about your book. So, what do you see is causing this upswing in activity r , upswing in prices and oil and what do you think are the impacts of that? Economically.
Dee: Well, in the first place, according to everything that weāve seen here is the consumption is the major factor right now because the consumption of oil is at a peak right now. We generally donāt see it till about the end of the Summer or the middle part of summer when vacation crew is really but right now, we are literally above what we are this time, 20% ahead of schedule as far as the consumption is concerned, and thatās nationwide, thatās not just here in Texas, itās all over the country. So, it appears that what weāre seeing is that weāre using more oil, therefore supply and demand, thatās the way that works and thatās why the price of oil has gone up like it has. Also, weāre seeing some cut back in some of the foreign countries as far as their production has been. In fact, I just read yesterday that the apartment base where I live which is a mostly West Texas and part of Eastern Mexico, it will soon become the largest oil producing area in the world. Itās gonna suppress all of the radio with its production very soon.
David: And by when are they predicting that? Jut with the next few years or ā¦?
Dee: Just a year, a year and a half, we look like that because the shale production out here , we now see thereās rare, you donāt ever see a drying hole anymore. These geologists are amazing and with directional drilling, they go down to a certain depth and and go off all in directions and pick up and theyāll find oil somewhere. So, youāre seeing a tremendous amount of that coming up in action out here right now. In fact, thereās over 450 wells being drilled right now in West Texas.
David: So, do you think prices are going to keep going up if you had your best guess just to what a grange it might be for oil prices per barrel? What do you think weāre going to have the range?
Dee: I think weāre going to see the price of oil go up until $85 per barrel area with the next perhaps two years. The clients that I have, and I have a number of clients that are in the petroleum business either in the acquisition or the maintain of the service divisions and theyāre all telling me that they have contracts right now, Dave. Theyāre going out two and three years. So, in that kind of activity, you can bet your bottom dollar and thatās the thing weāre talking about, bottom dollars, you can bet weāre going to see more and more of this stuff going on and the price of oil going probably to $85 s barrel . Itās not going to go like it did several years ago when it jumped to 140 almost overnight.
David: Yeah, letās hope not.
Dee: No. No. we donāt want to see that happen even here. Weād like to see a steady increase but hit going to that kind of crazy number.
David: Thatās interesting. It sounds like the United States is doing what they can to increase the supply to make up for reduced supply in other areas which hopefully, will keep your prediction in place will keep oil prices from getting too too crazy. Dee, we need to take a commercial break but stay with us please. And you, stay with us too, we have a lot more from Dee Carter right in the oil center of our county, Middking, Texas, coming back on The Income Generation. Stay with us.
David: Weāre here talking again with Dee Carter, straight from Middleing, Texas. So, Dee, I want to talk about your book but I have one more oil question. You know for the people that you speak Ā with, boots on the ground right there in Middlein, how concerned are they about this trade war and potential for retaliation in tariffs that could hurt us?
Dee: I donāt think thereās any concern about that at all, quite frankly. The people that Iāve talked to, the people in the know are really not that concerned about it because we feel like that in the first place, the President has done a great job positioning himself and the country in a position power in that regard. So, we really donāt worry too much about the trade wars. I think probably, most of that has kind of gone by the buy. I think the marketās even absorbed it almost immediately. So- but we donāt have a lot of concern about trade wars in West Texas right now. We really donāt care what they do because we know weāve got the product that everybody needs. So, the trade wars is not a big factor out here.
David: I love it. As a man from Texas says, āWe rally donāt care what they do because weāre from Texas.ā I love it, thatās awesome. So now, you hit your book coming out early summer and Iām going to read this because I want to get it right, āItās Now or Never: How to enjoy your life and not let your investments own you.ā Now, I could put you on the spot and ask you to sing āItās now or neverā but Iāve done that in previous shows so, Iām not going to do that. Give us the summary of what our viewers, Income Generation members, can expect to learn from reading your book.
Dee: Well, what Iām trying to do with the book, and itās something Ā that Iāve had on my heart for a long time to try to do and I was finally really directed to it and led to it by the interpersonal I get from the guys around us with the advisors academy but I wanted to do is just something a little bit different than what Iāve seen in the past and that is not only help people to find the kind of advisor that theyāre looking for, I mean, we all of different note in the way we operate in a lot of ways but know what to ask and how to do it, where to go with it and what to expect from that advisor. But not only that, I want them to get the bottom line about what planning for your future retirement really is in a very simple way, if at all possible, and that was a real good key and the idea behind it but weāre really looking at people that have never really done anything with advisors before or perhaps, they used to know. On the other side of the coin, and I really wrote the book for two different groups. People that donāt have an advisor and really have been trying to figure out how to go about doing it Ā but also for the advisor thatās out there in perhaps, giving them some ideas about how they can better serve the public. Iāve been in the business now for 47 years and thereās still trying advisors basically with the exception of the Advisors academy, theyāre trained the same way they they were 47 years ago when I first got my securityās license m. So, Iām sending them a better way.
David: Well, Iām glad to hear you to say that and unfortunately, weāre out of time today but weāll have you back on and talk more about your book because we are closer to your pub date but us good to write the books to those two audiences because a lot of people today who donāt give an advisor that are doing it themselves, they need to know what to do too. So, Dee, thank you very much.
Dee: Yeah, I appreciate it.
David: Good having you back and you stay with us and weāll be right back here on The Income Generation.
David: Iād like to thank both our guests for joining us on another episode of The Income Generation, ill also like to thank you our new and returning viewers. You know, last week, we talked about the federal reserves job right now being similar to trying to land an experimental airplane, the plane launched 9 years ago in response to the financial crisis when unprecedented levels of artificial stimulus began to be pumped into the US economy. All that experimentation has brougt us to where we are today, to a brand new age of economic uncertainty. Think about it. In order to land this airplane safely, the fed needs inflation but doesnāt want too much of it too quickly. It wants to continue raising short term interest rates but again, just the right pace so itās not risk another recession. Meanwhile, Wall Street sanctions for GDP growth to catch up with the overvalued stock market but is also extremely nervous about that growth being slowed or even reversed by factors like high inflation or higher interest rates. And as we saw today, you can have the potential negative impacts of rising oil prices to the least of things weighing on the minds of those on Wall Street. Thatās a big change from two years ago when investors appeared fearful of falling oil prices. But that just goes to show you how unpredictable the markets have become in this new age of economic uncertainty. Investors at an retirement age should be aware that the stock market will probably continue to be driven by fear regardless of how all these uncertainties play out. Now letās face shift, emotions do trigger real consequences in the markets. Sometimes, major consequences like a 30% rally based upon optimism after an election or perhaps to even 60% pull back based on fear. Thanks for watching. If youāre close to retirement and really want to know how to protect and maximize your money, itās absolutely Essential that you stay informed and up to date and right here is where you can do it on The Income Generation. Iām David Scranton and thanks again, we look forward to seeing you next week.
If youāre not using someone who is well trained in fixed income, and youāre born before 1966, it may just be time to break up with that advisor and move on. I would suggest someone whoāll care for you through these important years if your life. If you need help finding someone, call or write us. Iād also like to remind you of the special titled The Income Generation. Itās available fee to you, our loyal viewers online. If you havenāt downloaded your report, pick it up after the show.
