Why I think Heartland Express can rally

In looking at an overall grasp on the turnaround in the US economy, one of the first places one wants to look is the consumer. Below, we can see that retail sales have been trending up since 2008; a short time ago eclipsing the highs seen in 2005-2006.

We consumers wonder, how do these products get to the store shelves? The companies manufacture the goods, then trucks transport the goods to the retail locations. Investors have caught eye of this, and transportation stocks, as well as the Dow Jones Transportation Index. Here is a YTD comparison of the trucking sector.

Today I want to take a look at the underperformer on that YTD chart from above, Heartland Express. Via Google Finance, they are a short-to-medium haul truckload carrier that provides regional dry van truckload services through their regional terminals as well as its corporate headquarters. It transports freight for shippers and generally earns revenue based on the number of miles per load delivered. Its primary traffic lanes are between customer locations east of the Rocky Mountains.

Heartland operates nine specialized regional distribution operations in Atlanta, Georgia; Carlisle, Pennsylvania; Chester, Virginia; Columbus, Ohio; Jacksonville, Florida; Kingsport, Tennessee; Olive Branch, Mississippi; Phoenix, Arizona, and Seagoville, Texas. The Company operates maintenance facilities at all regional distribution operating centers along with shop only locations in Fort Smith, Arkansas and O’Fallon, Missouri.

Back in mid January of this year, I highlighted this name when they were due to report Q4 2012 earnings. I liked them then, and said that they had room to run 10% or more this year. After observing their Q4 2012 and Q1 2013 results, I believe they are prepared to go even higher.

From their Q1 2013 quarterly report, they ended the first quarter with gross revenues of $134.3 million, net income of $19.7 million, and $0.23 earnings per share. Freight demand was comparable to the first quarter of 2012 and was hindered by a harsher winter, one less work day due to leap year in 2012, and the Easter holiday falling in the first quarter this year. Net income increased 19.0% from $16.6 million in the first quarter of 2012 while earnings per share increased 21.0% from $0.19 in the first quarter of 2012.

Operating income for the first quarter was positively impacted by a $7.0 million increase in gains on disposal of property and equipment in comparison to the first quarter of 2012 as they continue to benefit from a good market from their well-maintained tractors and trailers. They continue to grow in the Western United States. Their western division, based in Phoenix, Arizona, has grown at the rate of 10% since the 3rd quarter of 2005, its first full quarter of operation.

Net margins for the first quarter of 2012 was 14.7% compared to 12.3% in the 2012 period. Over the past four quarters they have achieved an operating ratio of 81.4% and an 11.9% net margin on gross revenues of $545.2 million. They ended the past four quarters with a return on assets of 12.4% and a 19.3% return on equity.

Fuel expense is the biggest concern to look at when evaluating a transportation company. Their fuel cost per mile increased for the third consecutive quarter and was the highest since the third quarter of 2008. Their net fuel cost per mile increased 3.9% during the first quarter compared to the first quarter of 2012. The U.S. average cost of fuel was $4.03 per gallon in the first quarter. They continue to focus on fuel economy and efficiency through the management of idle hours, investment in fuel efficient new tractors, trailer skirts, fuel surcharge billings, and strategic fuel purchasing decisions. These efforts lessen the impact of the volatile fuel prices.

Fuel prices will continue to go up as the economy improves, so Heartland has to do the best it can to combat high diesel prices long-term, which I believe is possible. With other alternatives coming to light as we advance with better technology, it would not surprise me if they became involved in natural gas trucks or other cheaper resources such as renewable energy, which would be costly initially, but more profitable for them in the long run.

Profitability for them looking through 2014 looks positive. Revenue looks to grow 7% and EPS 5%. 

I ran a Discounted Cash Flows (DCF) model and came up with a target price of $15.03 for a return of +8.93% with a current market price of $13.80.

Feel free to respond or send any questions to @Peter_Eller10 on Twitter

Is this Warren Buffet's next acquisition target?

It has been 3 months since Warren Buffet has bought Heinz, Inc. In looking for other potential buyout targets for Buffet in the future, I came across Campbell Soup, which is a stable consumer name with a solid dividend. This along with a market cap at $15 Billion is right in the sweet spot for Buffet to potentially make a buyout in the future. Then again, the stock has run 25% since the Heinz acquisition, and 36% this year. Is the stock still a good value play today? Let's look at the internals..

Campbell Soup is a manufacturer and marketer of branded convenience food products. The Company operates in five segments: U.S. Simple Meals; Global Baking and Snacking; International Simple Meals and Beverages; U.S. Beverages; and North America food service.

They just announced their quarterly earnings report with an EPS of .62 vs estimates of .56, revenue also beat $2.09B v $2.04B. They are boosting their forecast range and see FY sales at the upper end of the 10-12% range. They also see FY EPS $2.58-$2.62 vs $2.51-$2.57. Their acquisition of Bolthouse added 11% to revenue; US Simple Meals sales rose 11%, earnings increased 30%. US soup sales rose 14% year-over-year, condensed soup rose 11% year over year, and Global baking an snacking sales were up 5% year over year. The only component that fell was US beverages, down 5% year over year, which hurt earnings 27%. Their Bolthouse acquisition looks to add $750M in sales to FY 2013 revenue. I will be listening in on the conference call at 10:00 AM EST to see if there is any more clarification going forward. 

My current target price is $44.12, 7.3% below the closing price from Friday. Though the target price is below the market price, I would rate it as a buy, especially seeing that it is still a potential buyout target, and with a 2.5% yield, it still proves to be a good long term investment.  As of 9:00 AM, it is up 3% in the pre-market to $49.00

Follow me on Twitter @Peter_Eller10 as well as our school investment funds @Bonasimm and @Simmenergyfund

Why Teva Pharmaceuticals is a good buy

After looking through the financial statements, I have concluded that generic pharmaceutical drug maker Teva, Inc. is trading at a discount right now, and looks to go higher. I will state my rationale, then show you the DCF model.

Teva, Inc. is a global pharmaceutical and drug company that develop generic drugs in all treatment categories. Their global operations are conducted from North America to Latin America to Europe and Asia; they are headquartered in Israel. They have operations in over 60 countries including 40 dosage pharmaceutical manufacturing sites in 19 countries, 28 research and development centers and 21 active pharmaceutical ingredient manufacturing sites. Their most recent major acquisition was Cephalon, Inc in the Fall of 2011.

In their conference call two weeks ago discussing their Q1 2013 earnings, they mentioned that their generics business performed in line with expectations, particularly strong in Eastern and Western Europe. Sales of their most widely sold drug, Copaxone were up 17% year over year and continued to lead the US and global Relapse Remitting Multiple Sclerosis (RRMS) market in sales. Revenue for their other CNS drug, Azilect gained 29% year over year and continues to experience strong prescription growth.

Their Oncology business was up 13% year over year with new plans to launch tbo-filgrastim in the fourth quarter of this year.

They reported revenue 4% lover year over year, mainly due to the anticipation of Provigil going off patent in Q2 2012, along with costs in creating generics for Zyprexa and Lipitor. These expenses were offset by strong generic sales in Europe. Their OTC business this quarter brought in 306 million in revenue, up 56% year over year. They expect US generic business to materially improve in the second half of the year with launches of new generic products in parallel with solid performance of their European generic business increasing revenue by 11% year over year to 873 million.

Looking ahead, they plan to make $5.02 a share this year, which would mean they are trading at a very low P/E of around 8.00 compared to their peers (Mylan 20.8, Jazz 13, Perrigo 26.2). Revenue is expected to say right about the same as last year at $20.2 Billion.

With our population aging, more people in the US and around the world will demand prescription medication, and what better place to invest in than generic drug manufacturers, that reap the benefits after the big pharma names go off patent? Plus, they boast a 2.8% dividend yield, higher than their main competitors (Mylan no dividend, Perrigo .3%). Their shares are currently trading at around $40.00, just $1.50 off of their 2008 low, but went down further after the financial crisis to hit an at that time 4 year low of $35.46. Their all-time high occurred in March of 2010 when they hit $64.54.  

My price target on the stock is $46.89, and I think it is a definite buy for the aging population we will be experiencing in the coming years.

Follow on Twitter @Peter_Eller10 as well as our school investment funds @bonasimm + @simmenergyfund

Should you trust the refiners going forward?

I have done a Discounted Cash Flow (DCF) analysis on one of the larger oil refiners in the US HollyFrontier (HFC). They have benefited the past year and half due to the wide Brent/WTI spread and Crack spread. The Brent/WTI spread is the difference in price between WTI crude oil, the US benchmark and Brent crude oil, the European/global benchmark. What we have seen recently is weakening demand for Brent and steady demand for WTI. With more technology, we are able to draw more supply out of Cushing, OK and push the price of WTI up, despite the EIA showing our current WTI supply near 20 year highs. It seems as though the US is trudging along, and Europe continues to remain weak.

The crack spread is the difference between the price of crude oil and its petroleum products; basically it is what an oil refiner's profit margin will be after breaking apart the oil. The most widely used crack spread is the 3:2:1 (3 barrels of oil, 2 barrels of gasoline, 1 barrel of heating oil).

Within the past two months, we have seen the Brent/WTI spread go from $20.00 to currently $7.88, as well as the crack spread go from $44.00 to $24.78.

Looking longer term at the Brent/WTI spread, it has kept between 0-$10 while the crack spread remains elevated, but looks to break lower.

Below is the DCF model I have worked out:

Even though I have a price 25% above today's current market price, I believe that the days of the wide Brent/WTI and Crack spread are just about over, and their profit margins going forward will substantially be hurt. The refiners have run up over 100% in a one year period due to these spreads widening, but I believe their current market price has not put in the fact that the spreads have fallen this far this fast. HFC is down 17% since the beginning of March, it's all time high; at the same time, the Brent/WTI spread was also at its widest point ever. I would advise not to get stuck in this trap, and not buy the stock, or if you own, take profits.

Earnings preview for the week of 1/14-1/18

I hope everyone had a great Christmas and New Year, it's time to get back into the swing of things as this week we get our 1st look at a handful of companies reporting Q4 '12 results. The broader markets are starting off the year on a high note with the S&P, Dow, and Nasdaq already up 3.2%, 3% and 3.5% respectively. There is a lot of bullish sentiment on the street to start 2013 due to the resolution of the so-called fiscal cliff. In the end, it was the Republicans getting the shorter end of the stick and we will see taxes rise for nearly every citizen in the US this year.

Above the S&P, Nasdaq, and Dow YTD

Dividend stocks, which I cover a lot of and own myself, have had a rough past few weeks, but appear to be coming back. Once again, the issue was the fiscal cliff due to the possibility of an increase in the dividend tax rate.  We saw that this was just a bunch of scare tactics, pushing these prices down to attractive levels. These consumer companies provide strong cash flow and solid forward earnings, and I see absolutely no reason to be selling them.

This week, Bank of America strategists are expecting a “great rotation” out of bonds and into U.S. stocks this year. In the past couple years, investors have been weary of stocks during the recent bull market, with trading volumes low and ownership of equity proving a hard sell. For the full year of 2012, there was only a net $3 billion that flowed into U.S. stock funds and exchange traded funds, which is minute compared to past bull markets.

Though this past week,  there was a big interest in purchasing stocks. A net $18-billion flowed into stock funds, blowing past the biggest week of inflows in 2012. In fact, according to BofA, the week’s inflows mark the biggest since June '08 and the 4th largest since 2000. This is not only happening in the US, but global as well. According to EPFR Global International, global emerging market and US fund data, $22-billion flowed into equity funds around the world during the same week, which is the second biggest inflow into stocks for data going back to 1996.

This could mark a trend in which small investors see the upside potential of equities; in turn the stock market could get a nice boost. Investors moving into a market tend to drive prices higher. Right now there are good reasons for a move into stocks: The U.S. economy is likely to pick up from a recovering housing market, with more government spending.

One trend I noticed is a 3 month chart of AutoZone compared with Ford and AutoZone. Ford is up 38%, GM is up 25%, while AutoZone is lagging 7%. Looking at a wider out chart of the three from the beginning of 2010, AutoZone has clearly outperformed both of them, up over 100%. In my opinion, this could be the year from the rotation out of the fixer-upper automobiles, into new cars. 

There is quite a bit of macroeconomic data out this week, lets run down what will be released:

Tuesday:

8:30 AM EST Producer Price Index

Prev -0.8 % Consensus -0.1 % (range -0.8 % to 0.4 %)

less food & energy  Prev 0.1 % Consensus 0.2 %                (range 0.0 % to 0.2 %)

8:30 AM EST Retail Sales

Retail Sales	Prev 0.3 %	Consensus 0.2 %	Range 0.0 % to 0.8 %
Retail Sales less autos	Prev 0.0 %	Consensus 0.3 %	Range 0.0 % to 1.1 %
Less Autos & Gas	Prev 0.7 %	Consensus 0.5 %	Range 0.2 % to 1.4 %

8:30 AM EST Empire State Manufacturing

General Business Conditions Index

Prev -8.10

Consensus 0.00

Range -5.00  to 9.50

10:00 AM EST Business Inventories

Inventories

Prev 0.4 %

Consensus 0.3 %

Range 0.1 % to 0.5 %

Wednesday:

8:30 AM EST Consumer Price Index

CPI	Prev -0.3 %	Consensus 0.0 %	Range -0.1 % to 0.3 %
CPI less food & energy	Prev 0.1 %	Consensus 0.1 %	Range 0.1 % to 0.2 %

9:15 AM EST Industrial Production

Production	Prev 1.1 %	Consensus 0.2 %	Range -0.1 % to 0.6 %
Capacity Utilization Rate	Prev 78.4 %	Consensus 78.5 %	Range 78.3 % to 78.9 %
Manufacturing	Prev 1.1 %	Consensus 0.4 %	Range 0.3 % to 0.6 %

10:00 AM EST Housing Market Index

Prev 47    Consensus  48   Range 46 to 50

Thursday:

8:30 AM EST Housing Starts

Starts	Prev 0.861 M	Consensus 0.887 M	Range 0.865 M to 0.920 M
Permits	Prev 0.899 M	Consensus 0.910 M	Range 0.870 M to 0.945 M

8:30 AM EST Jobless Claims

Prev 371 K

Consensus 368 K

Range 345 K to 385 K

10:00 AM EST Philadelphia Fed

General Business Conditions

Prev 8.1

Consensus 6.0

Range 2.0  to 14.5

Friday:

9:55 AM EST University of Michigan Consumer Sentiment

Prev 80.5

Consensus 75.0

Range 72.5  to 84.0

There are quite a few earnings to report this week, most of them the large US banks, which will get most of the attention. I want to focus on a few others that look fundamentally undervalued and a good place to put money to start off 2013.

On Monday, we hear from Heartland Express.  They are a short-to-medium haul truckload carrier which provides regional dry van truckload services through its regional terminals plus its corporate headquarters. They transport freight for shippers and generally earns revenue based on the number of miles per load delivered. Their  primary traffic lanes are between customer locations east of the Rocky Mountains. With their main headquarters in Iowa, they operate nine specialized regional distribution operations in Atlanta, Georgia; Carlisle, Pennsylvania; Chester, Virginia; Columbus, Ohio; Jacksonville, Florida; Kingsport, Tennessee; Olive Branch, Mississippi; Phoenix, Arizona, and Seagoville, Texas.

The transportation index and dry land transportation in general (ex-rails) had a lousy 2012, with the Dow Jones Transportation index under performing the broader market. I see a significant turnaround for the entire sector, as we have already seen all-time highs in the Transportation index after it being up only 6% last year. Industrial demand will pick up, and more freight will need to be shipped. More companies will be moving to expand their businesses with robots, making them more efficient, and getting adequate supply out to those who demand it.

They are currently trading at a 12 month trailing P/E of 17.7 with an EV/EBITDA of 5.60.They are currently trading near 3 times book value. Their ROE for the past 12 months is 18%, with a 5 year average of 18.5% They have been profitable for every year in the past 10 years with free cash flow positive in nine of them. Free cash flow was only negative in 2011 due to a significant amount of capital expenditures spent on the upgrade of its tractor and trailer fleet.

Heartland also paid a special dividend of $1 in December, due to possible fiscal cliff troubles, as to why their share price saw a sharp decline. Long-term this will be a minor blip.

There could be some risks due to their dependence on Diesel fuel, which tends to be more expensive than regular unleaded. As I have previously posted, I believe fuel prices will also turn around this year, but the increased dry land shipping demand will cancel out the potential for increased fuel prices. The company also does not boast a very large dividend, so you are putting forth a bit more risk, when you could be investing in a safer company. Overall, I can see the shared going up 10% or more this year.

Above, a chart of HTLD, along with main competitor Knight Transportation and the Dow Jones Transports.

Next, General Electric which in my opinion has a very large potential to do well this year, because of their position in alternative energy. There will come to a point within the next century of so where we will begin to see a slowdown in the usage of oil dependency and increase in renewable energy. Wind power has been growing quietly and steadily in the U.S. for about the past decade now, to about ten times what it was from the start (4gw to 40 gw). General Electric is one of the world's largest wind turbine suppliers with over 10,000 turbine installations around the world that have amounted to over 200 million operating hours and 127,000 GWh of energy produced. Wind facilities exist in five countries so far: The US, Norway, Germany, China and Canada. GE sells the turbines and offers services that support developmental assistance and maintenance.

I believe this is a great long-term investment, they have either been in-line or beat earnings estimates the past four quarters with next quarters report out this Friday to be the highest since 2008. If they come in at expectations, that will put GE at making $1.50 a share for FY '12 with a P/E of about 14.5. There is 8% year over year growth in GAAP EPS thus far. There are 21 analysts on the name with 13 of them at a buy/overweight and 8 of them at hold. The current price target is $24.62.

Profit margins have been steady between 38-40% in the past four quarters while revenue growth has increased 3% and 2% in Q2 and Q3 respectively. Net income in Q3 was $3.49B, while the estimate for this Fridays report is expected to be $4.26B; Q1 '13 which reports in March is also expected to be higher than Q3 at $3.70B.

Overall, I believe even with the slow revenue growth and stable profit margins, this is a name to own for the future. While you will not get the instant gratification of owning the stock for a year or so, this is something to think about long-term. They boast a 3.6% dividend yield of 19 cents which they have raised by 90% since 2009, which proves that they are loyal to their shareholders (I believe we could see another dividend hike to 20 or 21 cents this year).  The dividend payout increasing overtime does not concern me due to solid operating cash flow and no real compression on margins.

Comparing GE to its main competitors, they have slightly outperformed UTX, have beat the Dow Jones Industrials, and underperformed to Siemens this past year.

That is what I am looking at this week, since the semester is starting up today, I will try and post when I can, but I am afraid it won't be weekly. I will be on twitter daily so you can catch me there: @Peter_Eller10. 

2013 Oil outlook and why EPD can rally

Two words can describe the crude oil markets from 2012: Supply & Demand. The two global benchmarks saw substantial moves where overseas inventories were light, while in the US, inventories were at all-time record highs.

The US benchmark WTI closed out the year down 7%, the first annual decline since the global financial crisis in '08. New drilling methods have unveiled discoveries with new supplies of oil and natural gas. This especially in the Marcellus shale region of the US where I am currently living right now. There is a lot of controversy from all of this drilling, but I think the benefits outweigh the costs. There are people in my area who could not find work for months, even years who now have a steady income. The concern is what would happen when the area is out of places to drill, though by then the entire economy should have recovered enough to make it easier to switch in and out of jobs.

On the other hand, the European benchmark Brent that tracks the cost for many foreign buyers as well as the US coast, is up 3% as supplies are constrained. The increase in the price of Brent this year was concerning due to uncertainties in Europe, but nonetheless, other parts of the world continue to see demand for oil.

The spread between WTI crude and Brent reached its widest point ever in 2012, at one point Brent was more than a $25 premium to WTI, though WTI did catch up and gain in the last remaining weeks of the year to go just under $20 to the price of Brent.  The gap between both benchmarks has widened and narrowed based on the oil markets views on how quickly pipelines will help reconnect US oil supplies stuck in Cushing, Oklahoma to the global market.

Natural Gas was also very volatile this year, at one point going below $2.00 or down 36%, but finished the year up 12%. 

The graph above shows why Brent has traded to a premium all year to WTI. Crude oil supply in Cushing is at an all-time high and looks to continue its upward trend. From January 1st of 2012 till the last week in December, supplies are up 70%. There are currently close to 50 Million barrels of oil stuck in Cushing that are going nowhere due to lack of pipelines. As a result, gas prices have stayed high throughout the US (as a comparison, when gas prices were at all-time highs in 2008, oil was $150 a barrel, we are only 50 cents off all time highs in gas prices, but oil prices are down 40% from their all time highs). If we could get this oil out of Cushing and into the hands of others in the US, we would see a drastic decline in the price of gasoline.

Above are graphs of Crude oil and RBOB Gasoline. There seems to be a tight correlation, but currently gas prices are at a 8% premium to oil prices (Oil is 38% off its all-time high while at the same time, gas prices are 30% off their all-time high). This shows that gas and oil prices are not trading in tandem.

Above is retail for a gallon of gas, what someone would pay for at the pump. Current prices closed out 2012 20% below their all-time high.

Another reason we have been seeing lower WTI crude prices and higher Cushing supplies is due to the amount of domestic crude production in the US this past year. Domestic production saw its biggest yearly percentage increase since the 1980's where it was up some 20%. Looking at wider graph, the pattern was a long-term down trend, reversed this year. With the exploration of more oil in the Marcellus region and North Dakota region, we see more supply through the US.

With all of the data presented above, what do I expect to happen for 2013? Well, the only way to reduce gas prices and transport this is through building more pipelines. In November of 2011, Enterprise Partners said that they would reverse the Seaway Pipeline to carry crude from Cushing, OK to the country's main refining center on the Gulf Coast. When that occurred, the Brent/WTI spread narrowed $8, but widened again in 2012 as I mentioned numerous times above. US oil output surged and current pipelines could not handle all of the excess crude.

Throughout 2012, I was watching levels of US crude supply and saw that this Seaway Pipeline reversal had relatively no effect on stockpiles this year. Still, modestly increased shipments of oil from the Midwest to the Gulf Coast refineries have started displacing oil imports. Crude imports fell 9% in October from a year earlier (2011) to 8.1 million barrels, the lowest amount imported in 13 years. This year I believe could be a turning point as new pipelines start moving oil. Goldman Sachs predicts that the WTI/Brent spread will fall to $10 as more oil gets pushed through the Seaway Pipeline.

The estimated completion time for the Seaway Pipeline should be sometime in Q1 of this year, pushing through some 400,000 barrels a day (currently, there are 150,000/day). Also, the Gulf Coast Pipeline, (Keystone XL) being constructed by TransCanada, should be complete by late Q2 to early Q4 of this year, which could carry an estimated 830,000 barrels of oil per day.

Another pipeline extension from Cushing to the Gulf Coast is the Seaway Twin, expected to be online by mid 2014. This will be expected to carry 450,000 barrels a day.

As all of these pipelines come online within the next year, we will finally begin to see supplies in Cushing and elsewhere decline, getting prices at the pump down as well. Building these pipelines is beneficial for everyone to consumers and those in need of a job in a rough economy. I also agree with analysts that the spread will contract this year, putting pressure on US refiners who profit from a widening spread. I believe this is the year to own pipeline names and short the refiners as more oil will finally begin to come online.

One of the pipeline names I like long-term that will be benefiting from a lot of the production of these pipelines is Enterprise Products. They are the company who plans to build both of the Seaway Pipelines to be completed next year. They had a volatile 2012, ending up 5% which in my opinion would have closed out the year much better if it was not for the fiscal cliff drama (They are already up 6% in the first few trading days of the year.) Enterprise Product Partners is one of the largest MLPs in the United States. The company has over 21,000 miles in Natural Gas pipelines and over 17,000 miles of Natural Gas Liquids and Petrochemical pipelines. With the huge boom in Natural Gas over the past few years, they also stand to benefit from this as well. A major advance like the expansion of the Seaway Pipeline is a positive achievement for the stock price. By the middle of this month, EPD expects the new full capacity of 400,000 barrels per day to be in service. This represents an increase of 250,000 barrels per day from the previous 150,000 barrels per day of capacity.

From May of last year, the shipping rate for a barrel of crude through the pipeline was $3.82. Adding more pipelines will help with their bottom line, along with growing cash flow. Their Operating cash flow was 604M in March of '12, and current Operating cash flow as of the end of September is 1.6B. They continue to maintain a healthy balance sheet while paying a 5% dividend yield, which amazingly has increased every quarter for the past 9 years (yes, even during 2008). Their shares have outperformed their main competitor Kinder Morgan by 8% this past year. I easily anticipate Enterprise to eclipse $60.00 this year on their increased revenue from online pipelines. 

Above is a 5 year chart of Kinder Morgan, TransCanada and Enterprise (blue line)

I anticipate WTI Crude prices to close out 2013 10% above where they ended in 2012 which is exactly $100 a barrel. I also believe late spring and into early summer we could see the price of WTI to be above $105 but will level out. The range for WTI this year will be between $85 and $105, which is less volatile then the past year's range of $33 ($110-$77). Long-term oil prices will remain elevated due to increased demand, the employment rate and oil prices are highly correlated and as we see more people with jobs, they will end up consuming more oil by driving their cars. Within a few years, there is no doubt in my mind the price for a barrel of oil will be over $125, by then we will be just on the path to new and less expensive ways to fill up our tanks or recharge our cars. Though until that time, get ready for elevated gas prices and WTI crude oil.