Oil’s Last Harrah

Picture the CEO as the driver and the company as his car. By looking at what new passengers he takes on and in which direction he’s turning the steering wheel, you can see where he’s heading in the next 20 minutes.

But predicting where he’ll be going a hundred miles down the road gets fuzzier, doesn’t it?

For that, you need not only observation and intelligence but imagination.

What changes our world in unpredictable ways isn’t war or ideas. It’s technology.

This is where the serious money can be made. For example, if you could have anticipated that oil would increase more than five times since its $20 per barrel price in the 1980s, you could have made a lot of money.

Andrew Hall, who works for Citigroup, made just such a bet based on the simple premise that growth in demand was starting to outstrip growth in supply. He’s made a quarter of a billion dollars from that insight.

Now we’re stuck at the other end of the spectrum. Most people can’t imagine oil being cheap again. But technology made oil plentiful once. Who says it can’t do it again? Technology also invented the main users of oil, like cars. Who says technology can’t invent cars that run on something besides gas?

It’s already happening. Electric cars ply the roads. Soon air-powered cars will be tooling around our cities. Technology is on its way to upending the demand side of oil. And behind the scenes, it’s making inroads on increasing the supply side.

Oil won’t stay this expensive for more than another 2-4 years. The question is, do you have the stones and imagination to short oil? If you do, you should make an investment in the Ultrashort Oil and Gas (DUG) ETF. It moves in the opposite direction of the Dow Jones Oil & Gas Index. When oil starts to go down, this ETF will be shooting up.

You have time. Oil is still making new highs and supply is still very tight. Wait for the price to head down. Then simply be willing to believe in and act on what you’re seeing.

[Ed. Note: ETR’s Investment Director, Andrew Gordon, is the editor of INCOME, a monthly financial advisory service that uncovers income-generating stocks that promise safety (first and foremost), along with much-higher-than-average profit potential.]