Our team here at Money & Markets has been following oil and the energy market for some time.
After oil prices languished for years, Russia’s invasion of Ukraine has sent Brent and West Texas Intermediate crude prices to highs we haven’t seen since 2014.
I want to share with you some research I came across that might seem outrageous at first, but actually makes a lot of sense.
Then, I’ll tell you how you can profit from this trend.
Oil at $500 a Barrel … Outlandish … Or Is It?
Since 2000, the per-barrel price of West Texas Intermediate crude oil has topped $120 just once.
In June 2008, American-drilled oil touched $140.
Brent crude — the European oil standard — hit its high of $132 at the same time.
As we came out of the global financial crisis, oil prices fell, but went back up to around $120 in 2011.
I was surprised when I found a report from … of all places … the UK Ministry of Defense in 2013 suggesting oil could reach $500 a barrel:
At the time, the report cited the rising global population, depletion of oil reserves and “the growth of South Asian economies” as reasons why oil could reach $500 a barrel.
This was before Russia’s invasion of Ukraine shut off almost half of Russian oil to the outside world.
While it seemed outlandish at the time, if you fast-forward to today, it isn’t outside the realm of possibility.
Let’s examine why.
We’ve Been Here Before With Oil Prices
If we boil this down to simple math, the prospect of oil reaching $500 a barrel isn’t all that impossible.
Coming out of the 2001 recession, West Texas Intermediate crude was around $19 a barrel.
By 2008, the same barrel of oil was $140 — that’s a 636.8% increase in under seven years.
Today, it’s up 300% from where it was coming out of the COVID crash of 2020.
If we tack on a 636.8% increase to the current price, that puts the cost of a barrel of oil at $483.97 a barrel.
We saw the same thing with Brent crude:
The point here is that the percentages back up the fact that we could absolutely find oil at $500 a barrel in the future.
How You Can Profit From Oil Reaching $500 a Barrel
Oil companies make a profit when the demand for oil-based products is high.
This makes oil stocks so attractive.
And during The Oil Super Bull Summit, my colleague Adam O’Dell will give you all the details on his No. 1 oil stock for 2023.
Matt Clark, CMSA®
Research Analyst, Money & Markets