Jason Simpkins

The Truth About $6 Gas, $200 Oil and the Quest for Energy Independence

No one needs to tell the average American about the impact of oil and gas prices. If they don't feel it in their wallets every day, they hear about it on the news every night.

But surprisingly, amid all the rhetoric, there have been no real answers to some of the key questions driving the energy debate… until now.

Is President Obama truly responsible for high gas prices, and can his opponents really bring them back down?

What role has Federal Reserve Chairman Ben Bernanke's loose monetary policy played in soaring energy costs?

Is more domestic drilling the answer?

Renowned energy expert Dr. Kent Moors answers all of these questions – and more – below.

Dr. Moors, an adviser to six of the world's top 10 oil companies and a consultant to governments around the world, also talks about the effect political turmoil in the Middle East could have on energy prices in the immediate term and how North America will gain energy independence in 15-20 years.

Here's what else Moors – a bona-fide energy expert – had to say…

Dr. Moors on Gas Prices

Can a U.S. President actually impact gas prices- at least enough to get gasoline back to $2.50 a gallon? Or is this just talk? I don't know whom to believe anymore…

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Marathon Petroleum Corp. (NYSE: MPC): The Best Way to Turn High Gas Prices into High Octane Profits

Average gas prices currently are about $3.75 according to AAA's Daily Fuel Gauge Report.

That's higher than the average for all of 2011, which was the priciest year ever for gasoline. And what's worse is they're only going higher from here.

But if you think that investing in oil majors will help you overcome the sting of high gas prices this summer, think again.

While prices for both gasoline and crude oil have surged more than 10% this year, stock prices for oil majors like ExxonMobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) have been flat.

The dividends these companies pay won't make a dent, either.

It would take the average American something along the lines of a $20,000 investment in a stock that yields 3% to compensate for the surge we've seen in gas prices.

One reason these stocks have floundered is that the recent rise in oil prices has largely been the result of political tensions in Iran, rather than increased demand for oil.

Another is that President Obama has Big Oil subsidies in his crosshairs as he heads into this year's election.

Energy lobbyists have flooded Capitol Hill and Republicans have rallied to the defense of oil companies, but the November election will ultimately decide the fate of the $4 billion of subsidies oil majors get every year.

With so much money at stake, investors are rightfully wary of companies like Exxon and Chevron.

Still, that begs the question: If big oil stocks offer no respite from high gas prices, where can investors turn?

One solution is to invest in the United States Gasoline Fund LP (NYSE: UGA).

UGA invests in futures contracts on unleaded gasoline traded on the New York Mercantile Exchange (NYMEX). It's already up 18% this year.

But there's still an even better option, and that's

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Android@Home, Project X, and Other Secrets of Google Inc. (Nasdaq: GOOG)

Lately, Google Inc.'s (Nasdaq: GOOG) Mountain View, CA-based headquarters have looked more like the clandestine lair of a Bond villain than a business center.

The company has poured more than $120 million dollars into construction projects that are fit to house testing labs and top-secret initiatives with names like "Project X."

One theory about what's going on at the Googleplex involves the development of a driverless car.

And that may well be true – but the more immediate and practical use for the renovation would be to expand the base from which the company competes with rival Apple Inc. (Nasdaq: AAPL).

Google's war with Apple continues to escalate as the two companies fight for ground in three major consumer markets: mobile devices, Internet search and digital media.

Google fired its first salvo at Apple with the introduction of its Android operating system, which has come to dominate the smartphone market.

Apple recently retaliated by introducing Siri – the voice-activated search engine that has been a major selling point for the latest iPhone.

Still, the biggest clash is set to take place in your living room.

Google and Apple are fighting to be the company that supplies your media at home, stores it for you in a cloud drive, and then distributes it to your wireless devices.

Google has even expressed interest in bringing other appliances into the fold, connecting things like lighting, heating, and air conditioning via the Android operating system – a seamless integration dubbed "Android@Home."

The goal is to let you control every electronic device in your home through a smartphone or tablet.

This is a battle for what futurists call the "digital living room."

And it's just getting started. Here's a sneak peak at what's in store.

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The World's Two Best Sin Stocks: Diageo (NYSE: DEO) and Philip Morris International (NYSE: PM)

The common misconception is that so-called "sin stocks" only perform well when the economy tanks.

But the truth is that purveyors of alcohol and tobacco take their lumps during a recession just like everybody else.

That was certainly true of the world's largest spirits company Diageo PLC (NYSE: DEO), which traded as low as $42 a share in 2008. Of course, the stock has more than doubled since then, closing Friday at $93.38.

Shares of cigarette-maker Philip Morris International Inc. (NYSE: PM) have nearly doubled in the past two years, as well.

Still, you don't have to worry if you missed either of those rallies because there's still plenty of room for these two sin stocks to run.

Indeed, more and more consumers are returning to their vices as the global economy improves.

For instance, liquor sales, which stagnated in 2009, rose 4% last year, while sales of top shelf spirits increased 5.3% — a near return to pre-2008 levels.

What's more is that these gains came at the expense of the beer market, which typically has the upper hand in tough economic times.

"People who are doing well are going out and spending on spirits as an affordable luxury," John McDonnell, chief operating officer for The Patron Spirits Co. and chairman-elect of the Spirits Council, told Bloomberg. "Also, spirits companies never stopped spending through the downturn."

The same goes for tobacco products, which have been gathering steam in emerging markets even while they fall out of fashion in developed countries like the United States.

So let's take a closer look.

Diageo is Uplifting Spirits

Diageo – the company behind Baileys, Captain Morgan, Guinness, Smirnoff, and Johnnie Walker – is the most obvious beneficiary of increased liquor sales.

These are powerful brands that helped Diageo actually increase its cash flow during the recession. And now that consumers worldwide are in a slightly more festive mood, sales are set to take off.

Diageo, which produces about 28% of the spirits sold in the United States, reported a 5% increase in liquor sales in the U.S. and Canada in the second half of 2011.

More importantly, the company continued to expand its business in emerging markets.

While volumes were flat in North America and Europe, Diageo generated 14% volume growth in Latin America, 7% in Africa, and 5% in the Asia-Pacific region.

And that's just the beginning for a company that has made developing markets the focus of its growth strategy.

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This Defense Company has 24% Upside – Even with the Pentagon's Spending Cuts

When George W. Bush was first sworn into office on January 20, 2001, shares of defense contractor Lockheed Martin Corp. (NYSE: LMT) traded for $31.

By the end of his first term, they had doubled to about $60. And by mid-2008, prior to the October crash, Lockheed Martin had climbed to nearly $120 a share.

Those were the boom years – not just for Lockheed, but for most defense contractors.

Northrop Grumman Corp. (NYSE: NOC) shares doubled in the period stretching from December 2000 to January 2008, and General Dynamics Corp. (NYSE: GD) surged more than 133%.

But times have changed.

The last U.S. troops left Iraq in December and forces are expected to end combat operations in Afghanistan next year.

Meanwhile, the Pentagon is looking to cut spending by a half trillion dollars over the next 10 years. And war spending, which is funded separately by Congress, will likely fall from $115 billion this year to $88 billion in 2013.

Indeed, it's a new, leaner military that's taking shape amid talks of belt-tightening and austerity.

"Capability is more important than size," is the way General Martin Dempsey, the chairman of the Joint Chiefs of Staff, put it.

That means a change of tactics is in order for defense companies.

Some will rely on share buybacks and dividend increases, but that still might not be enough to fortify their stock prices. True success will only be accomplished by adapting to the new military's changing needs.

And right now there's only one company that fits the bill. We're talking about…

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All You Need to Know About Iran, $200 Oil, and $6.00 Gas

If you're unsettled by the thought of gasoline at $4.00 a gallon, brace yourself.

With tensions between Iran and the West quickly escalating, we could see gas jump to $6.00 a gallon at the pump in a matter of months.

Make no mistake about it: If Iran were to follow through on its threats to close the Strait of Hormuz, oil prices would surge as high as $200 a barrel in matter of days.

But that's just the beginning…

A wider Iranian war could throw the entire region into chaos — making $100 oil seem like a bargain.

None of this is hyperbole. In fact, these dangers are likely according to of one of world's leading energy analysts, Dr. Kent Moors.

Dr. Moors is an advisor to six of the world's top 10 oil companies, including natural gas producers throughout Russia, the Caspian Basin, the Persian Gulf and North Africa. He also consults for high-level officials from the U.S., Russian, Kazakh, Bahamian, Iraqi and Kurdish governments on all things energy related.

In short, Kent's insights are invaluable.

That's why we've given Dr. Moors a chance to address all of the concerns swirling around the energy market today.

In the interview that follows you'll learn what you really need to know about Iran, the global oil market, and most importantly, what you can do to profit…

Dr. Kent Moors on the Brewing Crisis in the Gulf

Q) Dr. Moors, how serious are the recent developments in Iran?

Moors: This is the most serious U.S.-Iranian crisis since the fall of the Shah in 1979. There's a very dangerous situation inside Iran that is only being accentuated by the oil market problems that have resulted from Western sanctions.

First off, on the Strait of Hormuz: This is the most significant oil choke point in the world. Some 35% of the world's seaborne oil shipments and at least 18% of daily global crude shipments pass through this narrow channel in the Persian Gulf. And while the Iranian Revolutionary Guard Navy is not large enough to blockade the Strait of Hormuz for any length of time, it could disrupt traffic.

Q) What effect would closing the Straits of Hormuz have on oil and gas prices?

Moors: Closing the strait would result in a rise in crude oil prices of between $20 and $40 a barrel in a matter of hours. Any interruption beyond 72 hours would push prices to between $150 and $200 a barrel.

As far as gas prices are concerned, the basic rule of thumb is that each $1.00 rise in a barrel of oil results in a 3.2-cent rise in a gallon of gasoline. So $200 oil would equal $6.00-plus gasoline.

Q) Why is this crisis unfolding right now?

Moors: Three major elements are causing Iran to become belligerent:

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Put An End to Congressional "Perks"

With a median net worth of $891,506, Congress members are nine-times wealthier than the average American household – and some Congressional leaders are exceedingly richer.

In fact, a recent analysis of financial disclosure forms showed Congress members' collective net worth was more than $2 billion in 2010 – a 25% leap from 2008.

If members of Congress are that rich, then why are average Americans footing the bill for so many of their luxurious perks?

Just look at what a member of Congress gets in addition to base pay of $174,100 a year:

  • Three-day workweeks.
  • A 401(k)-like plan that "matches" up to 5% of its input.
  • The chance to choose from 10 different first-rate health plans and access to an on-site doctor.
  • A full pension.
  • Retirement benefits.
  • Gym memberships.
  • Car service.
  • Free parking at two regional airports.
  • Free flights to almost anywhere in the world.
  • And a per diem travel allowance of $3,000 per trip.

And yet members of Congress still find time (and the audacity) to complain about political gridlock and federal spending.

Well, if we want to reduce "capital waste" we might as well start by scaling back Congressional perks. And if we want a governing body that's more solutions-oriented, then maybe we should increase urgency by making members of Congress live like the rest of us.


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2012 Oil Price Outlook: How to Profit From $150 Oil

2011 was an up-and-down year for oil prices, but don't expect that pattern to repeat in 2012.

No, next year, the trajectory for oil prices will be far more linear – and it's pointed up.

In fact, we could even see $150 oil by mid-summer.

There are two key reasons why:

  • Despite the economic crisis in Europe, oil demand proved resilient in 2011. It is poised to remain steady in 2012, and then escalate drastically for the foreseeable future.
  • Supplies will once again be constrained, and the potential for political upheaval in major oil-producing nations has increased.

These are the principal reasons oil prices have surged about 30% since dipping below $80 a barrel in early October. They're also why the world's upper-echelon of energy forecasters has oil prices building a floor above $90 a barrel and rising from there.

Indeed, Goldman Sachs Group Inc. (NYSE: GS) recently recommended that traders buy July 2012 Brent crude futures in anticipation of a rally to $120 a barrel. It was one of the bank's top six trades for 2012 published in its "Global Economics Weekly" report.

Barclays Capital agrees.

"Even in the worst case scenario, the downside to oil prices is unlikely to be anything as severe as during the 2008-2009 cycle," Barclays analysts Roxana Molina and Amrita Sen wrote in a report earlier this year. "As a result, we maintain our price forecast of $115 per barrel for Brent in 2012 and expect $90 per barrel to hold as a sustainable floor even under gloomy macroeconomic conditions."

As for West Texas Intermediate (WTI) crude the Energy Information Administration (EIA) expects it to average nearly $94 a barrel next year.

And even that's a conservative estimate.

"Given the oil volume constriction oncoming and the continuing increase in global demand – this drives the price, not North America or Western Europe – we will reach $150or beyond by July 4," said Money Morning Global Energy Strategist Dr. Kent Moors.

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Gold Prices Back on Track for $2,500 an Ounce

Having overcome a slight pullback heading into the fall gold prices now appear to have resumed their upward trajectory and will likely hit $2,500 an ounce next year – if not sooner. Gold prices surged to their highest level in more than a month yesterday (Wednesday), capping off a four-day bull run that's taken the […]

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Cyber Warfare Growing on a Global Scale – And We Have the Best Way to Profit

In the Internet era, cyber warfare is growing on a global scale.

Corporations, governments, armies, and anonymous groups of thrill-seeking hackers are playing a perpetual game of cat and mouse.

For that reason, worldwide spending on network and data-security technology will rise to more than $10 billion by 2016 from about $6 billion last year, according to a market-outlook report by technology-forecaster ABI Research.

Another recent study, by Forrester Research Inc. (Nasdaq: FORR), found that the share of business IT budgets devoted to security nearly doubled from 7% in 2007 to an estimated 14% last year.

If you're wondering what's behind this growth, you need look no further than some recent newspaper headlines.

Earlier this year, hackers infiltrated Sony Corp.'s (NYSE ADR: SNE) PlayStation Network and accessed the personal information of 77 million accounts in what's considered the biggest such security breach in history.

That was followed this summer by phone-hacking scandal at British tabloid The Daily Mirror that wreaked havoc on News International, media mogul Rupert Murdoch's British newspaper arm.

And finally, this past weekend Sesame Street's YouTube channel was compromised, and hardcore pornography videos displaced the likes of Elmo and Cookie Monster.

Of course, all of this is harmless troublemaking in the grand scheme of cyber warfare.

Indeed, a well-coordinated cyber attack on U.S. military installations or the country's power grid poses an even greater threat to stability.

And it's clear that that threat comes primarily from China.

Chinese "Cyber Militias" Conducting Cyber Warfare

U.S. officials blame China's government, or agents acting on its behalf, for the theft of neutron bomb designs, the defense secretary's e-mails, and private sector intellectual property worth billions of dollars.

Indeed, the Financial Times recently reported that the People's Liberation Army (PLA) already has partnered with China's private sector to form "cyber militias," units of young computer programmers tasked with cyber attacks and cyber defense.

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