When I drive in Brazil, it’s always with a flex-engine car that I can fuel up with ethanol, gasoline or any mix of the two.
That simple choice for consumers helps stabilize Brazil’s fuel market and fortify its entire economy.
But when I drive in the U.S., I have only one choice: Gas.
And now, a new, more formidable, gas crisis is bursting onto the American scene:
The average U.S. retail price of unleaded, regular gasoline has jumped a whopping $1 just since the beginning of February! It has hit an all-time record high of $3.227 per gallon! And it’s threatening to breach $4 per gallon as soon as this year!
I just spoke to a friend in Orange County, California, who was filling up his Suburban.
It set him back $125.
He says if he drives up the coast, it’ll cost him $500; and to return, even more.
Reason: Gas prices in Northern California are even higher, breaking through the $4 barrier.
Statistical Hanky-Panky?
This week, in an apparent attempt to lessen the psychological blow to American consumers, the U.S. Energy Information Administration (EIA) adjusted its inflation calculations and made it look like gasoline prices were not at record highs after all.
But according to the numbers from both AAA and the Lundberg Survey, the EIA is whistling in the dark: The previous record was March 1981 when the national price of gasoline was $1.35, or $3.15 in current dollars. Now it’s nearly $3.23.
So this is a new all-time record. Period.
In any case, by the time this Memorial Day weekend is over, it will probably be a moot point: Even as you read these words, over 32 million Americans are hitting the highways, more than ever before in history. They’re pumping hundreds of millions of gallons of gas. And they’re helping to drive prices still higher.
America’s Gasoline Stockpiles at Their
Lowest Levels in Half a Century!
In most years past, the major U.S. gas companies easily covered spikes in demand by drawing from stockpiles. Gasoline inventories across the country were abundant, or at least adequate. So during most peak driving seasons, although Americans felt some pain, it was usually not enough to write home about.
But now look: U.S. gasoline inventories are plunging.
The facts: Thirteen years ago, on January 14, 1994, we had over 190 million barrels of gasoline stored in the United States. On April 25 of this year, we had less than 102 million barrels.
And that’s with a larger population, putting more automobiles on the road, with each guzzling more fuel.
So, relative to demand, the U.S. conventional gasoline stockpile is the lowest in half a century.
This is not exactly a comfortable situation for our country. Especially since new refineries are not being built. Especially since recent plans by Big Oil to upgrade their existing refineries are now being scaled back.
Scaled back?! With demand rising and prices through the roof? What the heck are they thinking?
In its Thursday front-page story, the New York Times provides a possible answer:
“Some oil executives are now warning that the current shortages of fuel could become a long-term problem, leading to stubbornly higher prices at the pump.
“They point to a surprising culprit: uncertainty created by the government’s push to increase the supply of biofuels like ethanol in coming years.
“In his State of the Union address in January, President Bush called for a sharp increase in the use of biofuels … [and] Congress is considering legislation calling for a nearly fivefold increase in the use of ethanol.
“That has forced many oil companies to reconsider or scale back their plans for constructing new refinery capacity.”
Look. Last year, in hearings before Congress, the nation’s top oil execs said they’d expand existing refineries. They said they’d add production capacity for up to 1.8 million barrels a day over the next five years. And they implied that would help curtail price increases. But now, those plans have been scaled back to only about one million barrels a day.
And they blame it on President Bush’s campaign to encourage alternatives like ethanol!? They obviously aren’t paying enough attention to the proven success Brazil has already had in lowering gasoline prices by giving drivers alternative choices.
But regardless of the reasons, the largely undisputed reality is this: U.S. gas prices are going up — not just during this peak driving season, but for many months to come.
Four Urgent Recommendations
Recommendation #1. Consider energy-related ETFs. Already this year, Oil Service HOLDRs (OIH) is up 21.6%. And over the past five years, its average annual return is 18.6%. Meanwhile, the Energy Select Sector SPDR (XLE) is up 16.2% this year and has a 21% annual return over the past five years.
Recommendation #2. Look seriously at alternative energy, particularly uranium and ethanol.
Uranium has been enjoying the greatest price rises of any other metal. And the ethanol boom is barely beginning.
Right now, the ethanol industry may be getting a bad rap in the U.S. But that’s because it’s based on the less efficient corn-based ethanol. Meanwhile, sugar-cane based ethanol, pioneered by Brazilian producers, is an entirely different animal — and far more lucrative … which leads me to …
Recommendation #3. Invest in countries that will benefit the most as the U.S. is forced to shift to alternative sources of energy, especially ethanol and uranium.
Brazil is the world’s greatest beneficiary of the ethanol boom, and that’s one reason the Brazil ETF (EWZ) is up 19.8% in the first five months of the year.
Australia is the world’s leader in uranium reserves, with the Australia ETF (EWA) up 15.3% in the same period. And …
China, although a consumer of energy, has done more to lock in long-term supplies than any other nation on the planet.
Recommendation #4. Recognize the magnitude of these vast opportunities. And get my new blockbuster package of free global profit reports especially designed to maximize your profits in this environment. But …
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