It just doesn't get any clearer than this. When Saudi Arabia's former oil minister says potential unrest in his country can lead to a serious oil supply shock, even casual observers should realize that the global economy is on thin ice. Pursuing new hydrocarbon production can help mitigate supply shocks, and oil producers recognize the potential for unconventional oil sources to add to their proven reserves. Note that healthy M&A activity in the oil sector now includes a big dose of unconventional resource plays.
More production isn't the only way to keep the global economy on track. More reliance on the most energy-efficient means of cargo transport - rail and barge movement - is in order. Federal grants to improve passenger rail lines will likely have spillover benefits for freight rail. The U.S. DOT has a plan to make America's waterborne "highways" strong enough to accommodate more container traffic. These efforts are absolutely critical to keeping goods moving, since the trucking industry is unable to meet the current surge in demand for new trucks to carry freight.
Speaking of demand for transportation, here's a related observation. The most recent Cass Freight Index shows that monthly shipping activity rose 6.9% (13.8% yoy) while monthly freight payments rose by 6.3% (33.6% yoy). Those yearly numbers are an alarming indication that the price of transportation is increasing faster than delivered volumes. That's inflationary! Rising fuel costs are undoubtedly a big factor in pushing rates up, and evidence is mounting that higher fuel costs are impacting service sector growth. More focus on energy exploration and cheaper transportation can't come fast enough.
Full disclosure: Long TDW with covered calls.
More production isn't the only way to keep the global economy on track. More reliance on the most energy-efficient means of cargo transport - rail and barge movement - is in order. Federal grants to improve passenger rail lines will likely have spillover benefits for freight rail. The U.S. DOT has a plan to make America's waterborne "highways" strong enough to accommodate more container traffic. These efforts are absolutely critical to keeping goods moving, since the trucking industry is unable to meet the current surge in demand for new trucks to carry freight.
Speaking of demand for transportation, here's a related observation. The most recent Cass Freight Index shows that monthly shipping activity rose 6.9% (13.8% yoy) while monthly freight payments rose by 6.3% (33.6% yoy). Those yearly numbers are an alarming indication that the price of transportation is increasing faster than delivered volumes. That's inflationary! Rising fuel costs are undoubtedly a big factor in pushing rates up, and evidence is mounting that higher fuel costs are impacting service sector growth. More focus on energy exploration and cheaper transportation can't come fast enough.
Full disclosure: Long TDW with covered calls.
