Professor Glenn A. Okun
The Rabid Capitalist: The Big Point is a summary of a detailed note available to paid subscribers.
The true oil shock is looming over the horizon. Oil majors and the governments that stand behind them are depleting strategic reserves to hold down prices, but they are running out of options. If the Strait of Hormuz does not reopen completely, oil will rise above $150 per barrel by the Fourth of July. This is not so much a forecast as an exercise in basic arithmetic.
The arithmetic operation is called subtraction. There is a quantity of oil the world is no longer producing, a quantity it is quietly withdrawing from storage to offset the shortfall, and a date on which that storage stops being available. When you put those three numbers next to one another, $150 is a conservative estimate.
This week, the Princeton University endowment as much as acknowledged the opportunity for oil and gas exploration and production company stocks. It abandoned its climate-related investment policy enacted four years ago, reversing its commitment to divest from oil and gas firms. The prospect of compelling risk-adjusted returns alone could have motivated the decision.
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