Redrick Terry:
It is now time for 4 Your Money. We’re joined as always by David Nelson, CEO of NelsonCorp Wealth Management. David welcome back.
David Nelson:
Thanks Redrick, appreciate it.
Redrick Terry:
Absolutely. We’ve known that tensions have risen recently in the Middle East. In the past that’s created fears around oil prices and supply. This time around, should we be concerned?
David Nelson:
Yeah, clearly the Middle East is still the big horse. They’re producing more as an area than any place else in the world so it’s a big concern. Number two, anytime there’s disruption there again, it’s going to have a ripple effect as far as going forward. The slide I brought today I think will vividly show people as far as a couple of different scenarios that have taken place in the Middle East.
David Nelson:
The first one in blue here, we’re looking at the crises as far as when Iraq invaded Kuwait and we see right out of the chute that we had this 20% plus spike within two days that that took place as far as from that event. And we fast forward, we’re looking at a three month period of time here. We can tell here that the oil price rocketed up as far as a 70% increase at the peak and then it ratcheted back a little bit as far as after that.
David Nelson:
Now the crises we just went through, which was in Saudi Arabia where we had the oil processing facility that was hit probably by the Iranians, we still don’t know for sure, we had a similar spike as far as right away, but within four or five days it had ratcheted back to a level pretty comparable to where we were at the beginning. Today we’re up roughly 10% as far as from that. Again, this is a whole different story comparing the two as far as the different periods of time, today versus back in 1990.
Redrick Terry:
You said it, night and day really as far as the response goes, so what changed that led to this difference in response?
David Nelson:
USA is probably the easiest way of describing it. USA, we’re now producing an enormous amount of oil. I’ve got a chart as far as that’ll show this. It’s going to go back again to the seventies and eighties and we’re going to look at the events that have taken place and we’re looking at oil and this is imports versus exports. And so it’s a net number. What we can tell here is through the eighties and the nineties, we are importing enormous amount of oil that was coming in the door primarily from the Middle East. Subsequently when we had this crises over there, it was very significant. Now what we see is that it’s been ratcheting back since roughly 2005, 2006 and amazingly enough, this was quiet. Nobody really was talking about it, but the US today is a net exporter of oil, if you can imagine that. We produce enough oil as far as for the United States as well as we’re pushing product now afar. And this is significant as far as from a stability standpoint. As far as being able to have enough oil.
Redrick Terry:
Certainly. What does this mean for investors moving forward?
David Nelson:
Well, I think if I’m an investor, certainly this has to do with to the pump, but if I’m an investor, what we’re talking about typically is going to be inflation. Historically, this has been a great inflation hedge as far as investing in commodities. Today, not so much because we have all these breakthroughs, fracking that’s taking place, that’s allowing us to be able to get more oil out of the ground, what have you, and other energy sources that are being produced driving this down. This is more deflationary now than inflationary now, which is really good for the consumer.
Redrick Terry:
Absolutely. David, great to have you as always.
David Nelson:
Thank you, appreciate it.
Redrick Terry:
For joining us. And if you missed any part of our discussion, we’ll make it available to you on our website, ourquadcities.com.