Today’s Daily Angle comes fromWikinvest Wire member Hard Assets Investor. You can read the full article on the Hard Assets Investor Blog.

Price comparison of Crude Oil (CL) and the six oil majors (click to enlarge)

I’ve written previously about the problems with using ETFs as an oil proxy. We don’t need to get into all of that again, but the primary takeaway is that even though most energy ETFs are composed exclusively of oil derivatives, the funds themselves track the price of their benchmark poorly, especially when said benchmark is in contango.

No, I’ve always been an advocate of a more direct energy play: specifically, using futures contracts to invest in theenergy markets. Of course, this has its own problems, particularly the inability to make long-term plays, due to futures contracts’ expirations.

So what’s a would-be energy maven to do? If the ETFs don’t track the derivatives properly, and the derivatives don’t allow you to invest the way you want anyway, what option do you have?

Enter the oil companies.

Oil companies, obviously, depend upon the price of oil to remain profitable. Intuitively, when oil goes up, so too should oil companies’ stock.

Realistically, however, you can’t expect the current price of a barrel of oil to be entirely responsible for today’s value of an oil company’s share price, as there’s obviously a bit of a lag, and these companies have other facets to their business. So, more accurately, a share price reflects that company’s ability to make a profit from oil, rather than simply to follow oil prices up and down. If you want to make a play purely in oil, an oil company may not be for you.

However, if you want to make a more nuanced long-term bet on the oil industry in general, while concurrently investing in oil itself, one of the oil majors could work … but which one?

To answer this question, I’ve done a statistical regression comparing the continuous front-month prices of crude oil over the last four years with the stock prices of the six oil-majors: BP (NYSE: BP), Exxon Mobile (NYSE: XOM), Total SA (NYSE: TOT), Royal Dutch Shell (Nasdaq: RDSA), ConocoPhillips (NYSE: COP) and Chevron (NYSE: CVX). Let’s see how they stack up.

First, take a look at this chart comparing all six companies with continuous front-month crude oil futures (marked by CL):

The most important thing to notice is that even though the charts are moving more or less together, it’s not that tight a correlation. I don’t need to break out the logarithmic chart to show you that the movements aren’t exactly coupled at the hip.

That said, the prices still do ebb and flow together. Now, let’s compare the prices one by one to see just how strong the relationship is.

Click here to continue reading this article on the Hard Assets Investor Blog…

Today’s Daily Angle comes from Wikinvest Wire members MoneyMorning.com. You can read the full article on the Money Morning blog.

Growing up in Massachusetts, my mother used to say, “Live long enough, and you’ll see just about anything happen in politics.”

And she was right.

A wrestler, a standup comic, several movie actors, and former sports figures have been elected to office; tea parties are back as a way of challenging leadership; even a disgraced former governor makes it onto “Celebrity Apprentice.”

But she never saw this one coming - a U.S. sanctions move against Iran that may actually work… and make you some money in the process.

You see, today I’m going to make two rare suggestions. First, that one recent geopolitical decision will present a real investment opportunity, and second, that you should short a specific security to capitalize on it.

And here’s why…

A Profitable Short-Term Exception

I have generally avoided talking about how geopolitical discussions influence oil.

Politics is the all-too-available scapegoat to explain jumps in prices or translate what occurs in the oil market into an overly simplistic (and usually incorrect) view of how the theory of the week will change the world as we know it.

Certainly, what happens in international politics, if it is significant enough, can have an impact on what happens in the global oil market. Usually, however, it is merely a talking point for a droll media mouthpiece or somebody looking to get elected.

A crisis somewhere can increase jitters among traders and ratchet up the price of oil futures. As soon as the “crisis” dies down, however, so does the effect. Other factors, such as genuine demand, the strength of the dollar, or what is actually being extracted at fields worldwide, should have a greater weight in determining NYMEX pricing in New York or Brent pricing in London.

With all the rhetoric and spin expended, international politics rarely has the result that TV’s talking heads say it will. Short of quite rare events, like a war, some populist demagogue nationalizing my oil investment, or a politico waking up one morning and fundamentally changing the rules, I have rarely found exceptions to the actual muted impact of geopolitics on prices.

Welcome to one of those exceptions…. and a chance to make some relatively fast money.

Geopolitics is about to become profitable for the little guy.

Click here to continue reading this article on the Money Morning Blog…

Today’s Daily Angle comes from Wikinvest Wire member Edward Harrison of CreditWritedowns.com. You can read thefull article on Edward’s blog.

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Valero Energy has announced it is shutting down its Delaware City Refinery. This is a major news announcement because refiners should be seen as a canary in the coal mine for end-user demand and Valero is one company in the oil patch which has been loath to cut workers to improve the bottom line. This announcement is an indicator that, despite a technical recovery, the economy still has major obstacles to overcome.

Business Wire reports:

Valero Energy Corporation (NYSE:VLO) announced today it intends to permanently shut down its Delaware City refinery due to financial losses caused by very poor economic conditions, significant capital spending requirements and high operating costs. The shutdown will affect approximately 550 employees at the plant.

Valero notified refinery employees today of the impending shutdown, and will immediately begin negotiations with the refinery’s unions regarding the effects of the plant closure and the employees’ severance packages. A safe and orderly shutdown of the refinery will commence immediately. Valero remains committed to its marketing businesses in the Northeast and will continue to reliably supply its customers, partially through higher throughput rates at the company’s other refineries.

“The decision to permanently close the Delaware City refinery was a very difficult one,” said Valero Chairman and CEO Bill Klesse. “We have spent the last year diligently trying to avoid this situation, and I have worked closely with Gov. Markell in an effort to find a different outcome. Earlier this fall, we shut down the gasifier and coking operations in an attempt to improve reliability and financial performance, but the refinery’s profitability did not improve enough. Additionally, we have sought a buyer for the refinery, but feasible opportunities have not materialized. At this point, we have exhausted all viable options.

“We realize that the decision to close the refinery affects many employees, their families, and the community. We are thankful to our employees for their service, and we will treat them fairly during this difficult period.”

In the fourth quarter of 2009, the company expects to report a pre-tax charge of approximately $1.7 billion to $1.8 billion, or $2.00 to $2.15 per share after taxes, related primarily to asset impairment, employee severance and other shutdown costs. The company estimates the cash portion of the pre-tax charge will be in the range of $125 million to $150 million. The current and historical financial results of the affected operations will be shown as discontinued operations in the company’s financial statements.

The new CEO Bill Klesse came to Valero via Ultramar Diamond Shamrock (UDS), which Valero acquired at the top of the market in 2001. So, company ethos may be different than under Bill Greehey who was very committed to community. And Delaware City is an old Getty/Shell-Motiva oil refinery and a legacy asset of Blackstone-controlled Premcor, the company run by former Tosco head and Salomon Brothers commodities trader Tom O’Malley. So, it was not core to Valero’s operations. Valero already cut staff there in September. And the Shell-Motiva JV had serious operating difficulties with the asset before offloading it to Premcor.

Nevertheless, this was a refinery which has been upgraded significantly to process less expensive heavy, sour crudeoil. The fact that Valero is laying off workers and shuttering the entire site tells you that the situation is bad. They are saying in effect “we cannot continue to operate at a loss through this business cycle.” If Valero can’t make money, no oil refiner can.

I see this in a macro context as a sign of cyclically weak end-user demand. I do think peak oil is for real but the world is awash in oil and oil products right now. Witness the recent post by FT Alphaville’s Izabella Kaminska, which points to a glut of distillate entering the season of high distillate demand.

Continue reading this post on the Credit Writedowns blog…

Full Disclosure: Author has owned owned shares and call options in Valero and other refiners for a number of years, but sold all positions in 2007.

Today’s Daily Angle comes from Jason Simpkins of Wikinvest Wire members MoneyMorning.com. You can read full article on the Money Morning blog.

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View the full FUTURE:CL00 chart at Wikinvest

Declining investment and a lack of progress on alternative energy development could lead to sharply higher oil prices in the decades ahead, the International Energy Agency (IEA) said in its 2009 World Energy Outlook.

The IEA for the past year has warned that the financial crisis was undermining investment in energy development. The advisor to 28 developed nations says the financial crisis is already responsible for a $90 billion drop in worldwide oiland natural gas investment, which is 19% below last year’s levels.

“Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty,” said the IEA.

The decline in energy supplies combined with a sharp rise in prices could “undermine the stability of the economic recovery,” it added.

Investment in alternative energy has been particularly hard hit and the failure of governments to make progress on a comprehensive plan to cut global carbon emissions could exacerbate demand for traditional fuels.

Investment in renewable resources has fallen by about one-fifth this year, compared to 2008, the IEA said. Investment would have fallen as much as 30% had it not been propped up by government stimulus plans.

Officials from about 190 countries around the world are scheduled to meet in Copenhagen in December to discuss restrictions on carbon emissions in a deal that will succeed the Kyoto Protocol, which expires in 2012. However, developed and developing nations have routinely clashed over such regulations and little progress was made in last weekend’s Group of 20 (G20) summit leading up to the meeting in Copenhagen.

“The meeting turned out to be a mostly irrelevant sideshow on the way to the Copenhagen talks,” Richard Dixon, a director of environmental group WWF Scotland, told Bloomberg News.

The IEA estimates that $1.1 trillion needs to be invested each year from now until 2030, for a total of $26 trillion, just to meet energy demand on current growth trends. If governments adopt plans to limit greenhouse gas concentrations in the atmosphere to 450 parts per million of carbon dioxide (CO2) equivalent, an additional $10.5 trillion needs to be invested over that time period.

Without that added investment, energy needs won’t be met and energy prices will subsequently rise.

The IEA expects oil prices to average $100 a barrel by 2020 and $115 a barrel by 2030.