RIP big oil?
Monday, 4 March 2019
By Ryan Dinse
- The amazing tale of HL Hunt
- The Saudi’s call time on oil
- What happens next?
Ryan Dinse here today covering for Bernd who’s probably quaffing (you only quaff the expensive stuff) some red wine in his new home near the Barossa Valley.
Rest assured, he’ll be back tomorrow to tell us all about it.
But today, I want to talk about a less tasty yet equally important liquid — oil.
There’s no question that oil is the substance that defined the 20th Century.
Money, war, technological progress…it was at the heart of everything.
The rise of oil began near the turn of the century. As the world moved from steam power to combustion engines, the oil industry went stratospheric.
It created America’s first millionaire dynasties. It cemented the allure of capitalism — the strange belief in America that anyone could make it, no matter your social standing or family name.
You’ve probably heard of some of these early oil barons. People like John Paul Getty and John D Rockefeller.
Even today, over a century later, their descendants are still some of the wealthiest people in the world. Thanks to their ancestor’s foresight in claiming their part of the oil revolution.
But you might not have heard of Haroldson Lafayette Hunt Junior — understandably known throughout his life as HL Hunt.
His story is arguably the most amazing of them all.
I’ll get to it soon.
But the main point is this…
If stories from the likes of Rockefeller, Getty and HL Hunt represent the beginnings of the ‘oil century’, there are clear signs we’re now approaching its end.
This will have huge ramifications for the world. A new chapter is set to begin and the great oil dynasties are coming to an end.
But it’s also throwing up some unbelievable investing opportunities right now for those who can see what’s coming next.
And perhaps there’s a chance now for your ancestors to marvel at your foresight in much the same way as the oil baron families of the 20th Century.
That’s all coming up after the markets…
Over the weekend, the Dow Jones Industrial Average closed up 110.32 points, or 0.43%.
The S&P 500 gained 19.20 points, or 0.69%.
In Europe the Euro Stoxx 50 index finished up 13.84 points, or 0.42%. Meanwhile, the FTSE 100 rose 0.45%, and Germany’s DAX closed up 86.04 points, or 0.75%.
In Asian markets, Japan’s Nikkei 225 is up 239.01 points, or 1.11%. China’s CSI 300 is up 2.99%.
In Australia, the S&P/ASX 200 is up 26.30 points, or 0.42%.
On the commodities markets, West Texas Intermediate crude oil is US$56.07 per barrel. Brent crude is US$65.37 per barrel.
Turning to gold, the yellow metal is trading for US$1,298.10 (AU$1,830.11) per troy ounce. Silver is US$15.39 (AU$21.72) per troy ounce.
One bitcoin is worth US$3,776.43.
The Aussie dollar is worth 70.95 US cents.
The amazing tale of HL Hunt
Let’s start with the story of HL Hunt.
The youngest of eight children, the home-schooled Hunt was a math prodigy.
But his family wasn’t particularly well off and he looked destined for a life of plodding mediocrity working on a cotton plantation.
But, one day in 1912, he took a big gamble. With only $100 to his name, he set off to New Orleans to risk it all on a poker game.
Thanks to a bit of luck and some serious mathematical skill, HL managed to turn this $100 into $100,000. A fortune at the time. But Hunt wasn’t finished there…
With his winnings, he purchased the East Texas Oil Field and set about creating an oil producing giant.
By 1957, Fortune magazine estimated he had a fortune of around $400 million to $700 million.
Fellow oil baron J Paul Getty — the richest man in the world at the time — said of Hunt:
‘In terms of extraordinary, independent wealth, there is only one man — H. L. Hunt.’
Those wily oil barons saw the extent of the changes being brought about by oil. And it paid off — big time.
Like I said, oil dominated the 20th Century in more ways than one.
Now here’s the thing…
The time has come for it to end. The curtain is being brought down on the oil century.
Don’t believe me?
How about these guys…
The Saudi’s call time on oil
Saudi Arabia first struck oil in 1938. And since then, they’ve become the most important oil producer in the world. They have around 18% of the world’s oil reserves.
The country is literally dependent on oil wealth. It accounts for 50% of their GDP and 70% of exports.
So, when they come out with a statement like the following, you’d better sit up and pay close attention.
Head of Saudi Arabia’s state-owned oil producer Aramco, Amin Nasser told the annual IP gathering of oil and gas chiefs in London last week:
‘Time is not on our side. Our stakeholders are clearly tuning out. There is a worrying and growing belief among policymakers and regulators, investment houses, and NGOs, that we are an industry with little or no future.’
He went on to add:
‘One senior financial figure I spoke to confidently predicted the end of our industry in about five years!’ he said. ‘Another speculated that most vehicles on the road would be electric in five to 10 years.’
Though Nasser thinks this prediction is far-fetched, he did say Saudi Arabia will soon start diverting its oil to other uses rather than car petrol.
It seems the huge momentum behind electric cars is now so unstoppable even the oil-laden Saudi’s are accepting it.
Which begs the question…
What happens next?
Now, to be clear, oil will still be with us for a long time. Probably a century at least. It’s not just used for petrol, after all. It’s used in a wide range of plastics, chemicals and other fuels.
But it’s also clear we’re at the early stage of a huge trend change. If not the end, it’s definitely the beginning of the end of oil.
For the savvy investor, this spells opportunity.
Like HL Hunt and John D Rockefeller recognised, such transitions are rare. But if you can see what’s coming next, it could be the chance to create dynastic wealth.
So, what comes after oil?
Well, the first clues lie in the electric vehicle trend. A new material is set to play its part in replacing oil in the car industry. It’s not lithium or cobalt or any other ‘battery metal.’
It’s actually in a material that I think could be to the 21st Century, what oil was to the 20th Century.
And one small cap ASX stock could be set to play a leading part in its rise.
It’s already shot up 25% last week, but in my opinion there’s a lot, LOT more room for this if it does what I think it can do.
It’s a high risk play for sure. Small-caps always carry a higher level of risk than your average blue-chip play.
Still, that’s no reason to ignore an opportunity when it presents itself. Just as HL Hunt knew, the rewards for playing a few smart hands of poker can pay off immensely. The potential stocks gains you could score here could be immense, too!
If you’re interested in finding out more, you can access my full and frank research report on this breakthrough small-cap play here.