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| By Sean Brodrick |
Here’s a fun fact for you:
According to GasBuddy, Americans have collectively spent more than $100 billion MORE on gasoline and diesel since March 1 compared to the same period a year ago.
Oh, did I say “fun”? Yeah, that’s about as much fun as shaving your head with a cheese grater.
Sadly, that amounts to $109.2 BILLION hoovered out of America’s collective wallets through the end of Sunday.
And we’re spending another roughly $730 million more each day.
Now for the really bad part: It’s going to get worse.
That’s because the “Central Bank of Oil” — Saudi Arabia — is in real trouble. It is surrounded by enemies, and they are destroying Saudi export capacity.
The Strait of Hormuz is Still Strangled
More than 6 months into a war that was supposed to last “six weeks, tops”, overall commercial crude and fuel transit is moving at between 6 million and 9 million barrels per day (bpd).
That’s down about 60% to 70% from its pre-crisis norm of ~20 to 22 million bpd.
Houthis Hammer the Bab al-Mandab Strait
This is the southern exit from the Red Sea.
The Houthis — Iran-aligned militants in Yemen — captured the port of Mokha and seized islands positioned directly in the strait chokepoint.
The Houthis hate the Saudis, and this closes the southern seagoing exit for Saudi tankers.
That threatens up to 9 million bpd of oil.
Pipeline Blown Up!
A 1,201-kilometer pipeline stretches from eastern oilfields in eastern Saudi Arabia to ports and pipelines in the west.
It can carry 7 million barrels of oil per day. The pipeline was hit by drone attacks launched from Iraq on Sept. 10, forcing Saudi Arabia to shut it down.
U.S. Energy Secretary Chris Wright went on Bloomberg TV this morning and said the pipeline would be fixed very soon. Sure, buddy.
Only if you consider four to five weeks “very soon”, because that’s what every other credible source in the world says.
And you know the Houthis will want to blow it up again.
Add up all these outages and that is about 25 million barrels of oil per day that is either offline or at risk.
We Feel Saudi Pain
Oil is a commodity bought and sold worldwide.
What happens in the Middle East affects us, even though the U.S. is an oil exporter. That’s why U.S. benchmark oil prices surged over $103 a barrel this morning.
Bottom line: Gasoline prices are going higher before they go lower. That $730 million more per day that American drivers pay is going to increase.
You Can Profit, Too!
The big winners in this are refiners. Their margins are soaring.
North American oil producers will do well; refiners will do even better.
That’s the way we’ve been playing it in my premium publications.
An easy way to get on board this supertanker of potential profits is to buy the VanEck Oil Refiners ETF (CRAK). It holds a basket of refiners and diversified oil companies that do refining.
Examples of its holdings include Marathon Petroleum (MPC), Valero Energy (VLO) and Phillips 66 (PSX).
CRAK has a net expense ratio of 0.61% and a dividend yield of 1.16% — better than the S&P 500.
I believe CRAK is on its way to $105. That’s a 60% move higher from recent prices.
Part of that is because I believe this crisis in the Middle East will last longer, and prices will stay higher, than most people think possible.
It won’t be fixed by the midterms. It won’t be fixed by the end of the year. It may not be fixed by the end of Trump’s second term in 2029!
Individual energy names may do even better.
You’re feeling the pain at the pump, sure. You might as well recover some of that cash by investing in the companies making the most of it.
All the best,
Sean Brodrick
