Ride Over Bump in Gas Prices with These Investment Themes

U.S. oil independence is picking up steam. In December, the country lost its position as the world’s largest importer of oil, with shale production climbing faster than expected. Net imports fell below 6 million barrels per day, domestic production increased more than 1 million barrels per day and demand declined by about 700,000 barrels per day.

In the east, it’s a different picture, as Chinese crude imports reach record volumes. While the U.S. may nudge its way to the top position in the short term, it’s likely that China will “officially overtake the U.S. as the world’s biggest oil importer” in 2013, according to Citi Research.

Despite America’s energy renaissance, the price of a gallon of gas remains hinged on growing global demand and seasonal pricing trends. That’s why the recent bump in gas prices isn’t a cause for alarm, especially for resource investors.

Business Insider shared this chart from Deutsche Bank, showing retail gasoline price trends normalized to December 2012 prices. Going back 15 years, the price for a gallon of gas has historically risen during the first half of the year, and generally declined in the last half of each year. While this year’s increase of $0.53 per gallon seems alarming, the rise is a non-event when you compare it to the seasonality of oil and oil products.


Last January, we posted a seasonal chart showing a similar pattern, with returns of the S&P 500 Energy Index rising in February, March, April and May.


Themes to Capitalize On

This time every year, the futures market builds in the rising price of oil with the assumption that refineries are getting ready for the summer driving season. Annual maintenance is scheduled, causing inventories to build. Also, the summer fuel is a different blend that is more expensive to produce.

While there’s not much a consumer can do to lower the price of gas at the corner station, investors can act today on the more significant emerging energy trends. Here are three ways Global Resources Fund (PSPFX) portfolio managers, Brian Hicks and Evan Smith, plan to seize the potential opportunities:

1. Domestic Refiners: Strong overseas demand, a weak U.S. dollar and a glut of oil from growing unconventional production in North America have driven U.S. exports of gasoline and distillates to record volumes, heralding in a new golden age in refining.

2. Petrochemicals: A U.S. manufacturing renaissance combined with inexpensive natural gas feed-stocks unlocked from prolific North American shale plays have fueled profits of the U.S. chemical industry.

3. Midstream: With the rapid development of North American oil and gas shale basins such as the Marcellus in Pennsylvania, the Eagle Ford in Texas and the Bakken in North Dakota, infrastructure constraints are being alleviated with new investment in assets to gather, process and transport growing oil and gas volumes. We believe certain Master Limited Partnerships (MLPs) that have the right type of assets in the right geographic locations will allow investors to reap the benefits of the development of shale plays in the U.S. and Canada.

You can access these trends through select petrochemical or oil & gas MLPs, ETFs or stocks. Alternatively, you can take advantage of the expertise and multi-faceted approach of the Global Resources Fund.

Frank Holmes

Original article posted on Daily Resource Hunter