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The Best Way to Profit on Soaring Gas Prices

By Jeff Clark
Friday, May 9, 2008

"That's awesome, man. High-five..."
 
The two teenagers raised their hands above their heads and slapped them together. "I've never seen that happen before," one said as he turned and pointed at the gas pump.
 
The pump had clicked off right at $100. Not one penny above or below, but exactly $100.00.
 
The moment set off a celebration. The kids high-fived each other, shuffled their feet, did a little cabbage-patch move, and then high-fived again.
 
It was the dance of the $100 fill-up.
 
Sadly, I remember the good old days when the gas pump clicked off at $50. And by the looks of the following chart, it probably won't be too long before we look back fondly on the days when we could fill up the tank for just $100...
 
 
 
This chart of unleaded gasoline is a classic example of a rising channel formation. It's a bullish chart with a series of higher highs and higher lows, and it shows no signs of weakening. In fact, the advance looks like it's ready to accelerate.
 
That's bad news for drivers, as gas prices are likely to run even higher over the coming weeks and months. But bad news for drivers could be good news for refining companies.
 
Stocks like Valero (VLO), Frontier (FTO), and Sunoco (SUN) have been under pressure lately as the cost of crude oil has been increasing faster than the price of gasoline. Profit margins are compressed, and many refineries have chosen to cut back on production rather than produce gasoline at a loss.
 
Now, however, as the price of gasoline looks ready to accelerate higher, refiners just might see their operating margins expand – especially if the price of oil levels off or even falls a bit (as I expect it will, but that's a subject for another essay).
 
So, unless you're a teenager using Mom's credit card to fill up the tank, you won't have much of a reason to celebrate. But if you pick up a few shares of the refining companies at today's depressed prices, you too might dance a little when the pump clicks off at $100.
 
Best regards and good trading,
 
Jeff Clark




Recent Articles
Market Notes
World's largest commodity company BHP Billiton hits all-time high.
 
World's largest steel company ArcelorMittal hits all-time high.
 
Energy's still the big story... Anadarko, Suncor, Sabine Royalty, and just about every other oil and gas stock make new highs.
 
Refiners get cheaper... Tesoro and Sunoco at new lows.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%