Crackers are oil refineries that take various grades of crude oil and “crack” the oil into to grades of finished products. Gasoline products, resin bases for plastics and diesel oils come from the cracking process. Right now we don’t have enough refineries to handle surges in demand for finished products.
As you invest your money, consider that oil companies such as Exxon, British Petroleum and Chevron will continue to makes lots of money. Over the next 5-10 years, the world will continue to use more oil products. Imagine over 1 billion Chinese and Indians (India) driving cars and SUVs. Also world population continues to increase. You can depend on the need for oil increasing. The oil companies I’ve mentioned are integrated. They explore for new oil, they drill, extract, transport, refine and deliver products to your local gas stations. They do it all. The oil companies have said that right now there is plenty of oil. The problem is a shortage in refineries to convert oil to gas.
Remember this fact. The world consumes 82 million barrels of oil daily. The world can produce 84 million barrels of oil daily. We produce slightly more oil than we use. Not for long! If we get any disruption in supply like from hurricane Katrina, shortages can occur.
The U.S. uses 21 million barrels of oil daily. That is approximately 25% of total world production for our population that is only 5% of the world total. We suck up lots of oil daily.
Which brings me to the “crackers”. Since there is limited refining capability in the U.S. and the world, investing in companies that do nothing but cracking or have cracking as a major business segment makes sense. I belong to an investment club that owns Sunoco Oil, sponsor of NASCAR and a major “cracker”. It has tripled in the last 2 years. I am not recommending Sunoco right now because I think it might be a little inflated but over the next 5-10 years companies that own crackers will do well.
Oil is expected to last the next 40-50 years. After that there won’t be any more oil. We had better have alternate energy sources. For the next 5-10 years oil companies and crackers will do very well.
Eventually oil companies will have to re-invent themselves with alternate sources of energy because they will run out of the oil that sustains them. You can bet that prices will remain high so that they have the money to find new sources of energy.
Close your eyes, invest in oil and “crackers” and open your eyes in 20 years. You will have some extra money.
So there you have it grasshoppers. My view of “crude oil” business and how it might benefit you. Send all gratuities to my home address.
Love,
Dad