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Rick Rule Believes Oil Prices will Rise Regardless of Middle East Unrest


Henry Bonner



Oil investors have benefited from the rise of the price of a barrel of crude over the past several years. The price was in the mid-40s during the 2008 crisis, and has risen to around $110 per barrel today.

That’s quite a move, and, if you listen to the mainstream press, you’ll get one explanation for the current high price. But Rick Rule, Chairman of Sprott U.S. Holdings Inc., offered a different perspective in a recent oil and gas commentary to clients.

“The mainstream pundits will tell you that oil is expensive now because of the unrest in Syria and Egypt,” Rick begins. “But the truth is that Syria and Egypt don’t produce much oil.”

So why are oil prices high?

“The real reason is that there are expectations of a slowdown in oil exports brought about by the lack of sustaining capital investments in certain countries in South America.”

In our last note, we promised to expand on Rick’s case for higher oil prices, because of the long-term consequences of governments’ interference in the oil industry in certain South American countries.

Rick argues that higher demands from governments for a share of the revenue from oil operations, especially in Venezuela and Mexico, led to lesser re-investment in these countries by oil companies.

As a consequence, Rick explains, oil production in these countries is in decline.

To read this interview in full please click here.

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