Drilling Into Fuel Prices

Gasoline, deodorant, dishwashing, liquid, eye glasses, crayons….What does this list of seemingly random items have in common? They are all made from refined crude oil.¹ So even if you don’t feel pain at the gas pump, you probably rely on more products made with or from crude oil than you’d think. And of course even non-oil based products are generally shipped via fuel-consuming transport vehicles, so you’re bound to feel the pinch in the form of fuel surcharges or price hikes sooner or later.

But Beyond Bulls & Bears has never taken a fatalistic view. If volatility can present buying opportunities, surely there’s a possible silver lining to headline-making oil price heights. And so we turn to Fred Fromm, portfolio manager for Franklin Equity Group specializing in natural resources, and part of the team that analyzes the gold and precious metals market, aka the guy with the inside scoop on all things oil, gold, and even those other less-talked-about commodities.

Fromm in brief: 

• U.S. demand for gasoline is actually down, but demand outside the U.S. is strong.
• Geopolitical issues, namely in Iran and Syria, are being factored into oil pricing, but major disruptions may not occur.
• If China’s growth rate could continue indefinitely, its too-strong growth would likely strain commodity supply.
• Supply-demand balance looks tight enough to support gold, but demand can fall quickly and should be closely watched.
• Fromm opts for geographic diversification to avoid the risk of having too many investments in a country with a high degree of political risk.