Oil Prices Are Headed Lower, or Maybe Much Higher: Chesapeake Energy Corporation (CHK) and More

Potentially affecting both sides of this picture is, of course, whether TransCanada Corporation (USA) (NYSE:TRP)‘s proposed Keystone XL pipeline gains a presidential imprimatur this year. As Gerald Seib said in a Wall Street Journal column on Tuesday: “There is ample reason to think the second-term Obama White House, seeing openings to shake America’s dependence on Middle East oil, would like to find a way to give the green light (to the Keystone’s construction).”

Maybe, but maybe not. Perhaps Seib hasn’t been informed that, while still technically in his first term, the president quietly removed 1.6 million federal acres from the nation’s drilling allotment three days following the November election.

Energy’s potential tinderboxes
Finally, it appears that there are other, extremely daunting issues at play that could easily and quickly move crude prices far higher, long before the circumstances envisioned by either Morse or Powers bear fruit — and certainly prior to the construction of a pipeline from Canada to the Gulf Coast. I’m referring here to the tremendous number of underreported hot spots that describe much of oil-producing Africa and the Middle East today.

After all, with fiscal cliffs, sequestrations, and disabled cruise ships almost obsessively topping today’s journalistic agenda, there’s little room for geopolitical reportage. Suffice it to say, however, that al Qaeda is apparently up to no good in Nigeria. And to the north, Anadarko Petroleum Corporation (NYSE:APC), the largest producer in Algeria, surprisingly has not been forced to step up security in that country, along with other foreign producers.

Moving directly east along the Mediterranean, while Tunisia only produces about 70,000 barrels of crude oil daily, it nevertheless was the birthplace of the of the original Arab Spring in 2011. Today, it’s again become sufficiently chaotic that its prime minister saw fit to resign on Tuesday, and the path that’ll likely to be trod by its government is anyone’s guess for now.

Next, we’ll hop over the border to Libya, where the Islamist militia generally associated with the September Benghazi atrocities has turned up again, albeit with minimal fanfare in the West. And, as you likely know, the next country to the east, Egypt, is beset by all sorts of military and sectarian confrontations, as President Mohamed Morsi, a former leader of his country’s Muslim Brotherhood, attempts to consolidate his government amid fierce opposition.

Identical levels of daunting instability also pervade almost every country in the Persian Gulf region. That characterization obviously includes Syria, where Russian support for the Assad regime has again become apparent. And for various reasons, it also defines Iran, Iraq, and increasingly perilous Bahrain.

The Foolish bottom line
I could continue on, but you get the picture. Either Morse or Powers — although clearly not both — may be prognosticating the globe’s energy future accurately. Or, as is another possibility, a metastasizing of the perils besting many oil-exporting nations may preempt both of their scenarios, driving crude prices to the stratosphere in the process. Wherever you cast your lot, however, if you’re a Foolish investor, you simply can’t afford to let the energy sector get out of your sight.

The article Oil Prices Are Headed Lower, or Maybe Much Higher originally appeared on Fool.com and is written by David Lee Smith.

Fool contributor David Lee Smith has no position in any stocks mentioned. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.

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