As Fuel Costs Soar - Investing Locally Could Be One Of The Best Ways To Profit

Date 28/07/2008

The Right Side

Garry White

Fuel costs will slash global trade… so the big winners will be just around the corner

Things are looking up for Bognor Regis… It’s looking good for Southport and Morecombe too.

The British seaside is about to enjoy a renaissance – because we won’t be able to afford to go anywhere else. As I told you in Saturday’s issue, I believe that one of the major themes over the next decade is going to be deglobalisation.

We have seen more evidence of this today. Ryanair has issued a profit warning and its shares are down nearly 20%.

As fuel costs soar, we need a revolution in the way that we do everything… We aim to profit from that revolution.

There will be some companies that will profit big time from the localisation trend – and we intend to find them before everyone else catches on.

We are going to have to get more local with food, water, goods and services. If we don’t, transport costs mean we will not be able to afford them.

Ryanair’s statement reflected that trend… and it’s going to get much, much worse for the airline industry.

If you still have any airline stocks in your portfolio, sell them as soon as you can. As the oil price has eased in the last few weeks, now may be a good time to exit the industry.

Profits plunge 85%

Ryanair’s first quarter profits fell a staggering 85%. The company may even post a loss this year; the first since it listed in 1997… it could even be as much as EUR60m.

The cause is the high oil price and falling consumer confidence. The first is here to stay forever… the second will be here for a long, long time.

In order to try and get through the crisis, Ryanair is planning to ground 19 planes at Dublin and Stansted. But ultimately I do not expect the company to survive in its current form. Soaring energy costs have turned its business model into a busted flush. Indeed, 24 airlines have already gone bankrupt or stopped flying this year. By the end of the year, I expect this list would have grown substantially.

In June, the International Air Transport Association (IATA) revised its industry financial forecast for 2008 to a loss of $2.3bn. Its previous forecast was for the industry to make a profit of $4.5bn, which was based on an average oil price of $86.

For every dollar that crude oil rises, the airline’s industry's costs increase $1.6bn. The last two weeks has seen an easing of this pressure… but this won’t last for long. The world is about to undergo a transport revolution. It is going to get more and more expensive to fly anywhere.

This will not only mean less foreign holidays, but less foreign goods and services. We will have to find everything we need more locally… or we will have to pay the price.

These are exactly the type of opportunities I seek to uncover in the new world order for Commodities UK. To discover more click here.

Regards,

Garry White
Editor
Smart Commodities UK

^ Back to top

LinkedIn
Twitter
Del.icio.us
Digg
Facebook
Google Bookmarks
Livejournal
StumbleUpon