Monday, July 9, 2012

Jim Rogers Explains Why He's Still Bullish on Oil - CNBC.com

World markets appear to be hovering over a precipice as Europe’s sovereign debt crisis, slowdowns in India and China and further bank downgrades threaten to send stocks and commodities down even further. Falling oil and gas prices may offer some respite to consumers, but are they enough to help the economy or are they a symptom of deeper problems?

To help us look at these issues and more, we spoke with well-known investor, adventurer and author Jim Rogers. Jim is the creator of the Rogers International Commodity Index, he also recently completed a book called: "A Gift to my Children"—which helps people learn from their triumphs and mistakes in order to achieve a prosperous, well-lived life.
In the interview, Rogers talks about the following:

• Why recent oil price falls are a good buying opportunity
• Why oil prices could fall to $40 a barrel
• Investment opportunities with the renewable energy sector
• Why he is optimistic about nuclear energy
• Why agriculture offers good opportunities to investors
• Why Myanmar is the best investment opportunity in the world right now
• Why there could be further unrest in the Middle East
• Why we should let Greece fail
Interview conducted by James Stafford of Oilprice.com.
Oilprice.com: It’s been an interesting period in the energy world as we’ve seen oil prices steadily decline over the past few months, and with the problems in Europe and slowdowns in India and China, do you expect this trend to continue?
Jim Rogers: Well, there is certainly a correction going on for various reasons. I think Saudi Arabia's trying to help re-elect Mr. Obama. There are also stories that JPMorgan has problems in its London office with a lot of unauthorized positions they're having to liquidate. I don't know what's going on, but I do know that corrections are normal in the industrial world. There's nothing unusual about it. If it continues, there’s an opportunity to buy more.
Oilprice.com: I read a report by the Economist Phil Verleger, who thinks that the Saudis' massive increase in oil production, along with other economic problems could cause oil prices to crash to $40 a barrel oil and $2 a gallon gasoline by November. Do you think this is a reasonable forecast, and we could see oil at these levels?
Jim Rogers: We could see anything. We certainly saw lower prices than that back in 2008 when there was a collapse. When things are collapsing, all sorts of strange things happen. We found that out in 2008, and we will probably find out in the future, as well. If oil does go to $40, that means it'll just be setting up an even more bullish scenario for the duration of the bull market.
Oilprice.com: How do you see the energy markets reacting to the Iranian sanctions, which are going to be coming into effect on the first of July?
Jim Rogers: Oh, I don't see that having much effect at all. Everybody already knows about that—nothing new to the markets. They have long since adjusted to this news, whether it be stock markets, smuggling, etc. The Iranian sanctions are a non-event as far as I'm concerned.
Now, an attack on Iran would not be a non-event, but this is just more noise.
Oilprice.com: The Middle East Petocracies, along with Venezuela and Russia, must be nervously watching the price of oil. Can you see potential problems developing in these countries and other oil producing nations if prices continue to fall?
Jim Rogers: That's part of what I was saying before. The lower prices go for the fundamentals, the price of fundamentals improve, but for these countries the money they have available to buy peace is running out and there are going to be problems, because a lot of people have been lead to believe that the government can solve their problems and if the government runs out of money, it makes people upset.
Oilprice.com: Crude oil has dropped from $108 a barrel in February to $84 today. Do you think low oil prices could provide an economic stimulus?
Jim Rogers: Certainly, it's an economic stimulus for everybody who buys oil. There's no question about that. On the other hand, for people who produce oil, it's a negative. Now obviously more of us buy oil than produce oil, but it’s important to remember it does cut both ways.

Oilprice.com: Less than 0.1 percent of U.S. cars and trucks run on natural gas, and with falling natural gas prices and America’s dependence on oil and vulnerability to oil price shocks—I was hoping to get your thoughts on natural gas usage for transportation?
Jim Rogers: Well, If natural gas stays this low compared to oil prices, it does give an incentive to develop natural gas-powered vehicles, and I think we are going to see more and more developments here. Is it going to end the use of oil, combustion engines? Probably not any time soon. Someday it could, but someday is a long way away.
Oilprice.com: Do you believe natural gas prices are near to a bottom, or do you think they have further to fall?
Jim Rogers: U.S. natural gas is somewhere near its bottom, in my view. The problem is I expect to see serious economic problems in 2013 and 2014 in the U.S. If and when that happens, we're going to see a final panic in the markets and the economy and everything will have a crescendo and a selling climax.
We're certainly a lot closer than we were. Although, when you have a selling climax in markets, you go to levels much lower than most people believe possible and that may happen. Whatever that bottom is, it's not too far from the recent lows in natural gas.
Natural gas in many other places such as the UK are much, much higher than they are in the U.S. 

Jim Rogers

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