Lucas Energy (LEI:AMEX) - Economic Recovery Will Refocus Investors on Small Oil and Gas Plays
With oil around $80 a barrel once again, debate has begun among the financial pundits whether the rapid rise in oil prices will stifle economic growth going into 2010. I was reading an article just recently about the fact that oil prices were $30 a barrel in February and the rapid almost tripling in oil prices over a 9 month period will bear a heavy weight on the economy similar to a massive tax hike. We completely disagree.
Less than 24 months ago, oil analysts were predicting oil to trade above $200 per barrel and at the same time, they weren’t predicting a massive economic slowdown or significant pullback in stock market levels. Back in February, we were entrenched in an environment of bank failures and losses in retirement plans. One could make the case that $30 was an artificial low and a completely oversold condition. I tend to look at this way - oil prices are where they should be and oil prices should trade much higher as we move into a worldwide economic recovery.
Any rise in oil prices is incredibly positive for small oil and gas plays such as Lucas Energy. Here’s a compelling case for higher oil prices:
1. Potential for hyperinflationary period creates buy-side speculation on oil contracts.
2. Economic recovery
3. Geopolitical concerns in the Middle East, Nigeria, Russia, Brazil and Venezuela.
4. Cold weather expected in the Northeast from the El Nino phenomenon.
Lucas Energy remains an excellent way to hedge against oil prices. As oil prices go higher, so does Lucas Energy.
Notice:
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