Oil futures surged 4.7% ahead today and crossed over $100 per barrel for the first time since a brief period on January 3^rd. The markets main concern is based in speculation that OPEC will cut production when it meets next month. Those fears were fueled by comments by Iran’s Oil Minister, who pointed to decreasing demand as the winter heating needs diminish. There is also unrest in political hotbeds and oil producing nations of Venezuela and Nigeria. Furthermore, the explosion of an Alon oil refinery in Big Spring, TX also elicited a negative reaction. Though the refinery was relatively small-only processing 70,000 barrels a day-the impact on investors was large. Alon aims to resume partial operations in about 2 months, but the negative supply shock catapulted the price upwards.

So, it appears that there is little relief in sight for oppressive gas prices. Furthermore, oil prices have a broad effect on the economy, far beyond just the price of gasoline. Oil, at least currently, is the energy that our economy feeds off of and when oil gets more expensive it can have a broader inflationary effect. When you combine the waning purchasing power of the weakened dollar with the price of oil rising, it makes for a cash strapped consumer. However, as the saying goes, “if you can’t beat ‘em, join ‘em.”

While we currently have the Energy Sector ranked as the 8^th most attractive of the 10 basic sectors we rank, that is mainly because the energy stocks have not been affected like most by the recent correction, and thus do not appear to be undervalued strictly by the numbers. Even though Ockham rates most of these companies a hold, we expect this tendency to be resilient to economic slowdown to continue among the major diversified oil producers, such as Exxon ( XOM), Chevron ( CVX), and Royal Dutch Shell ( RDSA). These major oil companies are still selling well below price to earnings levels that are the average for the major indexes. Some of the less well known names in the Energy Sector are more undervalued though, some to consider would be Grey Wolf ( GW) and Pride International ( PDE) in the drilling and exploration business segment. Petro Canada ( PCZ), a refinery, is selling at reasonable price levels to consider buying.