Although the price of a barrel of crude is down from its peak of $147 set back in July of 2008, the oil crisis might only be beginning.
As much as we would like to chalk up the "oil spike of 2008" as a freak incident or a bubble fueled by solely by speculators -- the real culprits behind sky-high oil prices were plain, old-fashioned supply and demand.
Need proof? Think back to when the global economy was surging.
The American consumer was in full gear. And new industrial powerhouses -- China and India -- had a ravenous thirst for oil. Demand outstripped production. And crude prices rose to an all-time high.
Americans feared this could be the end of affordable gas. Many wondered if there was enough oil left to go around. In fact, Goldman Sachs analysts projected oil could reach $200 a barrel!
Then came October 2008. The credit crunch sank financial Titanics Freddie, Fannie, and WaMu. The markets dropped as fearful investors pulled their money out of stocks and came to the realization that there was no avoiding a painful global slowdown.
And as manufacturing slowed and unemployment rose, consumers tightened their belts. The flow of goods around the world slowed down and suddenly we didn't need all that fuel to power our trucks and ships. Supplies increased and the price of oil nosedived.
With respect to oil prices... we caught a lucky break. Cheap gasoline means less of a strain on household budgets at a time when everyone could use a little extra cash. Plus, lower energy costs mean lower inflation.
"Another spike may be on its way."
-- The Economist
A report from Morgan Stanley confirms it. The fact that oil companies are cutting back and delaying new oil field projects increases "longer-term supply risks."
Why? Simply put, oil is getting harder and harder to get. And more people than ever need it. As Emirati oil minister and OPEC official Mohammed al-Hamli puts it, "The age of easy oil is gone forever."
So when the world economy starts to fire up again, we can't just open the spigot and produce more oil. Supplies will lag behind demand and we could see oil prices shoot up very quickly again.
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Investors like you have a tremendous opportunity to scoop up shares of companies that stand to gain the most from the next surge in oil prices -- on the cheap.
The company you'll read about in this special report supplies the world's largest oil companies with the rigs they need to harvest oil from hard-to-reach fields like deep-sea wells.
Plus, it's also a leading manufacturer of equipment for drilling and constructing wells that produce an alternative fuel source we can tap right now -- natural gas.
That's a win-win. Because even if oil prices near $200, this company is positioned to profit from ever-increasing demand for natural gas in the U.S.
And our top energy pick, which you'll read about just ahead, is in the perfect position to cash in on this surging demand for natural gas. Because it's the dominant player in the industry -- owning 60% of the market share.
And it's in store for even more growth...
Because according to data from the U.S. Department of Energy, demand for natural gas will continue to skyrocket in the coming years -- eventually outpacing America's demand for oil.
Plus natural gas has Washington on its side. Because in order to reach our clean energy future, we need a cheap replacement for foreign oil right now. And President Obama, Congress, and energy experts all agree: Our best shot at finding a replacement fuel for our trucks and cars is natural gas.
According to CNBC, Obama's administration
"should be a boon to natural gas producers."
But the time to bank the most profits is running out! -- shares of this company won't stay cheap for long!
So, please read on to find out more about this worldwide leader in oil and natural production, its ticker symbol, and why it's a great fit for your portfolio right now.
Plus, why Motley Fool financial experts believe it will significantly outperform the market for the next 3-5 years ...
When energy prices rise, so does the cost of doing business.Companies that rely on fuel -- airlines, couriers, and manufacturers -- become stretched thin.
What's a Fool to do? Fight back.
Well-positioned energy stocks can help you hedge against the negative effects of increasing fuel costs. That's why we're pumped to recommend oil and gas supplier National Oilwell Varco [NYSE: NOV], a black-gold bet that's among the best in the biz. If a top-notch, bargain-priced company with gallons of advantages over the competition sounds enticing, get your drill bit sharpened and read on.
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We love finding the best operators in an industry -- financially strong, with leverage over competitors. National Oilwell Varco, a.k.a. NOV, fits that bill.
This $28 billion company supplies oil and gas drillers and production operators with anything they need. Short on rigs? NOV can deliver and set up everything from giant floaters that drill in the deepest waters to small land packages.
If you just need parts to keep the mud flowing down your drill stem (and who doesn't?), NOV is on call.
The fun doesn't stop there. The company also provides a wide range of services and support, whether that means inspecting tubing and sucker rods or training roughnecks to use computer-controlled vertical pipe racking systems.
But wait -- there's more.
NOV is an innovative force in the industry, constantly inventing and manufacturing products that improve the safety and productivity of drilling and well-servicing processes.
Its influence extends so deeply that Morningstar estimates NOV has a 60% share in the rig equipment market and that 90% of all rigs carry at least some NOV equipment.
It's also all over the map, operating 700 locations across six continents.
The NOV of today began over 150 years ago and is the result of a few key mergers and hundreds of acquisitions; the latest biggies include the 2005 merger of National Oilwell and Varco and the recently completed $7.4 billion buyout of Grant Prideco.
The management team is constantly on the lookout for acquisitions that will expand the company's reach, but the intense growth strategy is well within its comfort zone.
Pete Miller has capably served as president and CEO since 2000 and has nearly 30 years of experience in the oil and gas industry, while other major players have been with the company for a decade or more.
NOV has a few core competitive advantages that keep its margins higher than the competition:
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Revenue and profits are both growing at a 15% and 10% clip, respectively, over the past five years. Since the start of 2005, net margin has increased from 5% to over 11%. NOV's balance sheet is in good shape, with $2.4 billion in cash and $4.3 billion in long-term debt.
Lofty free cash flow gives management the option to acquire more companies, pay down debt, or repurchase shares.
Although we can't predict short-term fluctuations in energy prices, we firmly believe that, over the long term, the world's increasing thirst for the crude stuff will keep demand high for decades, meaning drillers will continue to explore, build new rigs, and upgrade existing ones.
In short, NOV's market opportunity should stay healthy, and we're more than happy to take advantage.
We like to think about diversity when offering you stock ideas, and this standout, bargain-priced oil supplier certainly has us revved up.
With impressive competitive advantages, strong management, and growth prospects rich as Texas tea -- all while helping you hedge against rising energy costs -- National Oilwell Varco can't be beat.
There you have it - our best idea for profiting from energy right now.
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All scorecard numbers as of July 31, 2013. All other figures as of April 30, 2013.