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Elliott Gue knows energy. Since earning his bachelor’s and master’s degrees from the University of London, Elliott has dedicated himself to learning the ins and outs of this dynamic sector, scouring trade magazines, attending industry conferences, touring facilities and meeting with management teams.

Elliott Gue’s knowledge of the energy sector and prescient investment calls prompted the official program of the 2008 G-8 Summit in Tokyo to call him “the world’s leading energy strategist.”

He has also appeared on CNBC and Bloomberg TV and has been quoted in a number of major publications, including Barron’s, Forbes and the Washington Post. Elliott Gue’s expertise and track record of success have also made him a sought-after speaker at MoneyShows and events hosted by the Association of Individual Investors.

Elliott Gue also contributed chapters on developments in global energy markets to two books published by the FT Press, The Silk Road to Riches: How You Can Profit by Investing in Asia’s Newfound Prosperity and Rise of the State: Profitable Investing and Geopolitics in the 21st Century.

Prior to founding the Capitalist Times, Elliott Gue shared his expertise and stock-picking abilities with individual investors in two highly regarded research publications, MLP Profits and The Energy Strategist, as well as long-running financial advisory Personal Finance.

In October 2012, Elliott Gue launched the Energy & Income Advisor, a semimonthly online newsletter that’s dedicated to uncovering the most profitable opportunities in the energy sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.

The masthead may have changed, but subscribers can expect Elliott Gue to deliver the same high-quality analysis and rational assessment of investment opportunities in the energy patch.

Articles

Updated Outlook for Oil Prices

Although we became bullish on oil prices last summer when the commodity slipped into the $40s per barrel, our forecast for West Texas Intermediate (WTI) to average between $60 and $65 per barrel appears conservative—especially in an environment where involuntary supply disruptions and robust demand growth could result in short-term spikes to $80 per barrel. We now expect WTI to spend most of its time between $60 and $70 per barrel in 2018 and Brent to range between $65 and $75 per barrel.

The Decline Curve Never Sleeps

Oil-field services giants Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL) perform work for large integrated oil companies like Exxon Mobil Corp (NYSE: XOM), national oil companies like Saudi Aramco, and smaller independents. These two giants operate in just about every oil- and gas-producing country in the world and provide indispensable services.

By virtue of their geographic reach and diversified service and product offerings, Halliburton and Schlumberger’s management teams have a bird’s-eye view of the oil industry that they often share during their quarterly earnings calls.

In the almost 20 years I’ve covered the energy sector, the insights gleaned from their conference calls have furnished countless investment ideas and read-throughs throughout the energy value chain. The first quarter was no exception.

During Schlumberger’s first-quarter earnings call, CEO Paal Kibsgaard discussed the looming air pocket in global oil supply–a consequence of the industry slashing spending on exploration and development. We’ve discussed this risk at length in Energy & Income Advisor, but early evidence of this shortfall has emerged.

 

Electric Vehicles: Semiconductors Offer the Best Near-Term Opportunity

Although the global push to break away from the internal combustion engine continues to gain traction, this process won’t take place overnight. Widespread adoption of fully electric vehicles will require improvements in driving range, battery cost and charging times. There’s also the need to build out sufficient charging infrastructure.

A large-scale shift toward electric vehicles would also necessitate significant investment in the grid. Simulations conducted by Matteo Muratori, a transportation and energy systems engineer at the National Renewable Energy Laboratory, found that uncoordinated charging of plug-in electric vehicles could present challenges for the grid. Potential solutions to this quandary reside in the application of big data and machine to machine communications to balance the load.

In addition to electric vehicles, the auto industry and leading technology players continue to pursue autonomous driving, an innovation that leverages advances in processing power as well as data storage and transmission. Early efforts in this direction have produced some tragic results, with Tesla possibly overstating—or drivers misinterpreting—the capabilities of its autopilot function.

These developments, coupled with the rise of ride-sharing services such as Uber and Lyft, have contributed to visions of a future where a fleet of autonomously driven vehicles starts to erode individual ownership of automobiles, especially in urban areas.

Speculating and arguing about these potentialities can be a stimulating experience; however, investing based on a concretized view of an uncertain future often results in more pain than profits. We would remind readers that a good story doesn’t always make for a good investment.

The transportation segment appears ripe for disruption, but this evolutionary process will take place over a longer time frame than some overexuberant investors expect.

In picking stocks with exposure to this theme, we aim to identify names that also offer leverage to near-term upside catalysts; the slice of pie on your plate offers more sustenance than the pie in the sky.

 

Peak Oil Myths and Realities

Over the past two years, a new concept of peak oil has become popular. This time, the idea isn’t peak supply, it’s peak demand: The view that electric (EV) and autonomous vehicles (self-driving cars) will soon erode demand for crude oil.

Whereas peak supply translated into a sharp rise in oil prices, peak demand implies a terminal decline in crude prices, a rapid erosion in the value of energy reserves worldwide and disastrous economic consequences for both energy companies and oil-dependent nations like Saudi Arabia.

Two decades ago, the idea of peak oil supply was flawed but contained a kernel of truth. Much the same can be said of the new fad of peak oil demand.

Over time, electric vehicles will gain in popularity, and the world will become less dependent on oil. However, the idea that fossil fuels are dying or that oil demand will enter a phase of terminal decline in the next 10 to 20 years is fantasy: Fossil fuels have decades of life ahead, and the transition is unlikely to result in a sudden erosion in the value of oil and gas reserves and energy-related stocks.

Our outlook for a gradual energy transition implies two major profit opportunities are at hand:

  • We expect at least one more major up-cycle in energy and commodity prices over the next few years, driven by supply costs and growing global demand for crude and refined products; and
  • Although we regard calls for EVs to take significant market share in the near term as overblown, investment opportunities exist to profit in the near term from the growing electrification of automobile subsystems—a trend that’s already underway and doesn’t depend on hopes and dreams for the global energy mix in 2040.

In this issue, we explore the macro implications of the intersection between peak oil demand and electric vehicles. Part two of these series, which will come out next week, will explore investment opportunities (and potential pitfalls) related to electric and autonomous vehicles, as well as government efforts to improve automobiles’ fuel efficiency.

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  • Live Chat with

    Elliott and Roger on Jun. 28, 2018

  • Portfolios & Ratings

    • Model Portfolios

      Balanced portfolios of energy stocks for aggressive and conservative investors.

    • Coverage Universe

      Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.

    • MLP Ratings

      Our assessment of every energy-related master limited partnership.

    • International Coverage Universe

      Roger Conrad’s coverage of more than 70 dividend-paying energy names.

    Experts

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor