Shell’s president says we are just one bad storm away from high and volatile oil prices. I wonder what he considers high and volatile?
“We are one hurricane away from energy scarcity and volatile, high prices,” Hofmeister said a day after crude oil prices topped $80 — a record, unadjusted for inflation. “We are so tight on the demand-supply relationship.”
Americans for the past half-century have largely enjoyed a lifestyle based on the availability of cheap, abundant energy, Hofmeister said. As demand for energy has grown — the nation today consumes 10,000 barrels of oil per second, he said — its “energy security” has been compromised, he said.
“We have seen our country pass, in my opinion, a tipping point of energy supply keeping up with demand,” Hofmeister said.
Hofmeister just described Peak Lite, which should be a pretty good preview of the situation shortly after world oil production actually does peak. He is also spot on about the potential for a storm to bring on the pain. Had we had a Katrina-style hurricane this summer that took some refineries offline for a significant period of time, you would have seen gas stations running out of product very quickly.
But this is also why I think oil company stocks remain a good investment. If you have a product in great demand, and supply can’t keep up, prices are going to stay high (although I do expect prices to correct downward by year-end). Oil companies should be a safe, but perhaps not a sexy place to keep some money for the long-term. I do not subscribe to the viewpoint that oil companies are going to sit around, twiddle their thumbs, and become extinct while alternative energy producers take over the energy industry.
Disclosure: My 401K does contain oil stocks, and I probably have more through various mutual funds.