William Patalon III: Oil prices have been surging on fears that the Obama administration is planning to punish Syria for using chemical weapons against its own people.
But the real question is whether this escalation in “black gold” prices is going to continue.
As we’ll see in a minute, our in-house energy expert – the noted Dr. Kent Moors – believes that oil prices are headed much higher.
And he has lots of company.
Oil prices hit their highest levels in two years yesterday after NBC News reported that the Obama administration is “past the point of [no] return” because of reports that Syria used chemical weapons against its own people.
And that means that military strikes against Syria could occur “within days,” the network reported.
West Texas Intermediate (WTI) crude rose to nearly $110 a barrel, its highest level since May 2011. And Brent crude – the global benchmark – hit a six-month high north of $117 a barrel.
Whether this energy-price surge keeps going, of course, is dependent on how hard the U.S. hits Syria – as well as what happens afterward.
But there’s a growing belief that oil prices are fated to climb much higher before this latest global mess is resolved.
LandColt Capital’s Todd Schoenberger grabbed some headlines yesterday when he said on Yahoo! Finance’s Breakout program that a protracted conflict in Syria will cause oil prices to challenge their 2008 record highs of $147 a barrel – creating an energy price spike that, not surprisingly, would kill the European “recovery” before it reaches sustainable status.
That will be great for energy investors, as well as for gold prices, he said.
Looking back, you can see how we got to this point.
Syria was under “emergency law” from 1963 to 2011 – a move that essentially crushed constitutional protections for the country’s citizens.
But that changed with the “Arab Spring.” Since March 2011, the Syrian Arab Republic has been involved in a bloody civil war – ignited by uprisings that experts say were inspired by the regional revolts against oppressive regimes pundits called the Arab Spring.
Uprisings against Syrian President Bashar al-Assad and the neo-Ba-athist government have turned into a bloody series of engagements that culminated with last week’s alleged chemical attacks that reportedly left hundreds dead in the Damascus suburbs.
The Obama administration is said to be looking at launching air strikes or cruise-missile attacks that would keep Syria from again using chemical weapons (considered a “weapon of mass destruction,” or WMD). But Washington wants to avoid having Damascus retaliate in a way that escalates the conflict and perhaps leads to a broader war in the Middle East.
For instance, there are very real worries that Syria or that country’s allies might then attack Israel. That would force Israel to retaliate, bringing the Jewish state into the conflict and putting the United States into a very tough spot from the vantage point of Middle East diplomacy.
And with many experts believing that President Assad will be able to “ride out” U.S. reprisals that are limited to air strikes, there are worries that U.S. President Barack Obama might consider an even more concerted – and prolonged – attack on Syria.
Any kind of escalation will roil the financial markets. Mike Wittner, global head of oil research at Societe Generale, told clients that a spreading conflict could easily drive Brent crude up to $150 a barrel.
“Our big worry is Iraq,” Wittner wrote. “The Sunni vs. Shiite conflict in Syria has a direct parallel in Iraq, and the violence in Iraq has reached levels not seen since 2008. Iran, who is Syria’s only state ally in the region (Syria is also allied with Russia and with the Lebanon-based Hezbollah militant group), may choose to stir up…attacks [on oil production and transport facilities] in order to hurt the economies of the Western countries by causing an oil price spike.”
Kent, who runs our Energy Advantage advisory service and is our resident energy expert here at Money Map Press, also happens to be one of the best-connected insiders in the world energy sector today. He says investors should prepare themselves for the volatility and continued surges in energy prices that will result from any prolonged conflict.
And he also made an excellent point that I haven’t seen many of the other “experts” zero in on: It’s not enough to just remove Syrian President Assad: There also has to be a plan to somehow fill the leadership “vacuum” that will result from his ouster.