As I expected back in July, the price of insurance is getting more expensive these days...
In this essay
I passed on some wisdom from one of the world's best resource
investors. The wisdom was to keep a portion of your portfolio in "oil
insurance"... in shares of companies operating in the Canadian tar
The idea here is that much of the world's oil lies in the unstable
Middle East... and a shooting war in Iran could cause a disaster with
that supply. Canada, however, is home to the world's second-largest oil
reserves. It's a stable country next to the world's mightiest military
power. If trouble arises in the Middle East, as it has regularly for the
past 1,000 years, Canadian energy assets will skyrocket in value.
Actually, any problem with the world's conventional oil supplies
leads to higher valuations for Canadian energy assets. So you can think
of owning shares of Canadian oil operators as owning oil insurance.
I told readers of the S&A Resource Report
about this idea in March 2010. We bought Canadian tar sand giant Suncor for our portfolio... and it's a good thing we did.
As you can see from this one-year chart, crude oil prices are marching higher right now...
A leak shut down the Trans-Alaska pipeline, which carries 15% of
U.S. oil production from Prudhoe Bay to the Port of Valdez and on to the
lower 48. In addition, troubles in the North Sea cut European supplies.
The crude oil market is tight... and getting tighter. According to
the Energy Information Agency, world oil demand grows by 1.5 million
barrels per day, while non-OPEC supply grows at just 0.1 million barrels
per day. Right now, any supply disruption will cause the price to
S&A Resource Report readers are up 34% on their oil
insurance investment in Suncor. But shares of Suncor and its Canadian
colleagues will go much higher if oil prices break $100 per barrel.
If you haven't bought your oil insurance yet, now is the time to do so.