What’s all the oil in the world worth?

I’m sitting in for Ben today. As you know, he’s on holiday until Wednesday. He’s stuck me here in the hot-seat while he’s off to the Edinburgh Comedy Festival.

Rather than trying to match his wit, let me just tell you about one of the big trends that I have been exploring with readers of my Profit Hunter investment service: the great Petrodollar migration — the colossal transfer of wealth to the oil exporting countries. With the price of oil shooting through the roof, one of the most fascinating questions is just how much all the oil out there is actually worth.

The other big question is how do you get your slice of it?

I’m going to give you an answer to both of them today.

Forty times bigger than the UK

At $100 a barrel, the oil exporting countries are sitting on total proven reserves of about $104,000 billion: $104,000,000,000,000.

That’s equal to the value all publicly-traded shares and bonds in the world.

Putting it another way, that’s about FORTY times the value of entire UK economy last year. Forty times the value of all the goods and services that we produced in this country in 2007 — from every ice-cream and donkey-ride sold in Margate to the biggest deals in the City.

You can probably already see that there is a fortune to be made here if you can get your hands on even a tiny slice of that.

So, who has got what?

The six Gulf Co-operation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) have the lion’s share with about $48,000 billion in reserves.

The other members of the OPEC oil cartel own another $44,000 billion.

That leaves the non-OPEC oil producers like Canada, Norway, Mexico and Russia with a relatively measly $12,000 billion worth of oil reserves.

You can already see that the big winners from the great petrodollar migration are going to be the OPEC oil cartel members.

But that doesn’t really capture the scale of the wealth that these countries have got. Because that $104 trillion figure is just the proven reserves that these countries have — what has already been discovered. It doesn’t take into account the potential value of further probable reserves that they might have.

And of course oil isn’t trading at $100 per barrel anymore either.

Where the big money is

Let’s just zoom in on the Gulf countries. Right now they’re raking-in a billion dollars every single day from oil exports. And with oil at $130 per barrel, these countries alone are actually sitting on about $65,000 billion worth of oil.

That’s three times the total value of all the shares on all the stock markets in the world.

Position yourself to profit from a tide of petrodollars

And the oil exporters are now using that enormous wealth to begin snapping-up foreign assets. You’ve just got to look at the figures to see the scale of what’s happening. And why I’m so excited by it...

At the end of 2007, the oil exporters collectively owned $4.6 trillion in foreign financial assets. Almost half of that — $2.25 trillion — was owned by the Gulf Cooperation Council (GCC) states.

And this is just the beginning of a colossal shift in economic and financial power away from the old "core" Western countries towards the oil producers.

Because if oil prices remain at $100 per barrel over the next five years, the value foreign assets purchased with petrodollars will grow to $12.2 trillion by 2013

Stop for just a minute and think about that. I mean really think about what that means, because the sums involved are truly staggering. $12.2 trillion dollars is almost FOUR AND A HALF times the size of the entire economic output of Britain in 2007!

And even if oil the price falls to $70 per barrel the petrodollar economies are going accumulate foreign investments worth $10 trillion by 2013.

And this isn’t something that is going to happen at some point in the future. It’s happening right now.

What we are now witnessing is nothing less than a global re-alignment of financial power... and the profit opportunities for those positioned to benefit from it are going to be huge.

Subscribers to my Profit Hunter service look set to profit from this shift in economic power. We have invested in a Gulf merchant bank that has an unmatched record of re-investing the Gulf’s huge reserves of oil money in undervalued Western companies.

Its shareholders include some of the richest families in the world: Gulf royals and oil billionaires. With the petrodollars rapidly piling-up in the Gulf and Western asset prices falling fast, this company looks set for boom times.

Why the big oil companies are a bad investment

Now, you might be wondering why not just invest in the big oil companies? The simple answer is that I don’t think they’re a good long-term investment.

Today, Fatih Birol, the chief economist of the International Energy Agency (IEA) said that oil production in non-Opec countries is set to peak within the next two years. That’s going to leave the world even more dependent on OPEC for its energy.

But its also bad news for investors in the traditional oil companies like Shell, Exxon and BP. Because the bulk of global oil production is going to be controlled by state-owned oil companies.

Let me just quote you what Birol actually said:

"The days of the international oil companies are coming to a glorious end because their reserves are declining and they will have difficulty accessing new reserves...In future we expect most of the new oil to come from a very small number of national oil companies". The IEA is the energy watchdog for the developed economies — mostly European and American oil importing countries. So he isn’t just scaremongering to try and drive the price of oil higher. He’s giving us a clear warning of what we’re going to in the next few years.

Realistically, if you want to profit from the high price of oil over the long-term, investing in the usual suspects is the wrong way to do it

Of course, you can try profiting from this by investing directly in oil through ETFs, futures and options. But oil prices can be volatile. We’ve seen it pull back sharply since it hit a record $147 on July 11th.. In fact, oil had its biggest ever weekly fall last week.

So, rather than betting on the volatile oil price, I’ve been showing members of my Profit Hunter investment service how to play from this massive trend while avoiding the volatility of the oil price.

We’re getting our slice of the Gulf’s petrodollars through that Arab merchant bank, but we’re also set to profit from another extraordinary development...

Non-OPEC production is collapsing Right now, the non-OPEC countries produce about 60% of global oil supply - about 50 million barrels a day. But they’re stuck there. In fact production is falling quickly in some of the biggest of them.

Norway’s output has fallen by 25% from its peak in 2001. British output has slumped by 43% in eight years. In America, the giant Prudhoe Bay field in Alaska has seen output drop by 65% from its peak two decades ago...

Then there is Russia. It has been the biggest contributor to the growth in global energy supplies over the last decade. Output shot up from about 6 million barrels in 1996 to about 10 million barrels per day now.

But the Russians say that they’ve hit peak production...so it’s all down hill from here...

Of course, huge chunks of Siberia are still unexplored and there could be lots more oil out there. But the Russian government has shown a nasty habit of muscling- out Western companies operating in the country to gain more control over its energy resources. So they are reluctant to invest and we probably won’t see any meaningful growth in supplies there for years.

And in Mexico, production at the giant Cantarell oil field is collapsing and they haven’t found any new fields to replace it. But Mexico’s economy is growing rapidly. So, domestic consumption is shooting up while production is falling. Mexico’s exports could be wiped- out within five years.

That’s giving America’s leaders sleepless nights because Mexico is the second- biggest oil exporter to the US.

Africa could be the big winner from this

But peak oil in Russia and the non-OPEC producers should mean fat profits in Africa.

The Gulf of Guinea on the west coast of Africa is emerging as the new hot spot for the oil industry as the United States looks to the region to reduce its dependency on oil from the volatile Middle East.

In fact, the Americans plan to source 25% of their oil imports from the region by 2015.

Then you have got the Chinese. The Chinese are desperate to lock-up the energy supplies they need to keep feeding their industrial machine. So they’re even investing in strife-torn places like Somalia, Sudan and Niger.

The Chinese have already invested more than $30 billion in the continent’s oil and gas industry. And they’re just getting started.

All that new investment is sparking economic growth in parts of the world that ordinary investors would never even dream of investing in.

Just look at Equatorial Guinea, that tiny country on the West coast of Africa. This is where Mark Thatcher and his friends tried staging a coup to grab hold of its huge oil reserves. The country is sitting on about $143 billion in oil reserves. The Americans and the Chinese are already in there pumping oil. And its economy is growing by over 10% per year.

And one little company listed right here in London controls the only real deepwater port in country. That port is booming as it emerges as the key logistics hub for the region’s oil industry. Readers of my Profit Hunter service are already invested in it.

And then there is Angola. In April, this former Portuguese colony on the south-western coast of Africa overtook Nigeria as Africa’s biggest oil producer. It’s now producing so much oil that its economy is now growing at a mind-blowing 16% per year.

That’s TEN times as fast as the UK! And it’s almost twice as fast as China.

This country doesn’t even have a stock exchange. But that little London-listed company my readers are invested in has major investments in Angola: airlines, water bottling, a major logistics centre...

So we’re well-positioned to profit as this oil-fuelled economy takes-off.

The simple fact is that with demand for oil still soaring and non-OPEC production collapsing, there is going to have to be a huge wave of investment in Africa’s oil industry and infrastructure if the world is going meet its growing energy needs.

Getting in early on Africa’s oil boom may just be the smartest move you could ever make as a long-term investor. And that little London-listed company I mentioned is without a doubt the best way I know to play the huge profit potential of Africa.

How to profit from the petrodollar boom

So if you’re keen to find out how you can position yourself to profit from the huge trend of profit dollars I mentioned at the top of this email AND how you can get into Africa, make sure you read my full report.

And here’s another extraordinary investment opportunity...

While I’ve been looking for backdoor ways to buy into the great petrodollar migration, my colleague Garry White at Smart Commodities UK, has found three fantastic ways to profit from the global water crisis.

When the UN and Goldman Sachs came out and confirmed everything Garry had been saying for years I thought he’d be happy.

"It’s all very well I’ve been proved right about the greatest threat to our civilisation," he said with a distinct lack of elation. "But if the mainstream cottons on to the ways I’ve found to profit from it, I’ll be really annoyed."

Garry’s put together a report detailing three ways you can play the coming water crisis in order to enjoy both short- and long-term gains.

And you’ll be amazed to see the lengths Garry will go to for maximum gains.

Click here now to discover how man’s greatest threat could be the world’s biggest profit opportunity. P.S. If you enjoyed this article then we encourage you to sign up for the free Fleet Street Daily eletter. Learn what you can expect from today's markets -- and how to prosper in the face of uncertainty. You won't find more thought provoking writing anywhere on the Internet.

^ Back to top

BlinkList
Del.icio.us
Digg
Facebook
Google Bookmarks
Livejournal
Newsvine
Reddit
StumbleUpon
Yahoo! My Web

What’s all the oil in the world worth?

RELATED ARTICLES

SMART COMMODITIES UK

PROFIT HUNTER

What’s all the oil in the world worth?