“Whether you’re very bullish or bearish, you should own some oil or energy equities,” said Marc Faber, publisher of the Gloom, Boom, and Doom report, on CNBC.
Faber figures that if either scenario plays out, oil prices will be pushed higher either on the supply side or the demand side.
If the economy improves, the developed world – which cut back on consumption after the global recession – will demand more oil and drive prices up.
If, however, inflation soars and countries go to war – which is the risk currently, in Faber’s opinion – then the supply of oil will be interrupted and prices will go up.
Faber’s bearish scenario isn’t so far-fetched; soaring food prices in Tunisia recently toppled the government.
Oil has performed well in the past few months. It went from a low of $67 per barrel in May all the way up to the current level of $93 per barrel.
The rally likely reflects the positive scenario, i.e. economies in the developed world are improving so oil demand is expected to increase.
Loose monetary policy from the Federal Reserve is likely another factor that pushed oil prices higher.