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Investing to Offset High Gas Prices

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Frank Holmes

NEW YORK ( U.S. Global Investors) -- Does it feel like it costs an arm and a leg to fill your car these days?

Although consumers may continue to feel the bite from higher gasoline prices, investors can use these rising prices to their advantage.

Beginning in March, crude oil has a seasonal wind at its back. For nearly 30 years, the third month of the year has been the best month for crude oil. As you can see in the chart below, over the past five-, 15- and 30-year cycles, West Texas Intermediate crude oil prices head higher in March, and have generally continued to climb through September.

Recently on Yahoo! Finance, "Daily Ticker" host Aaron Task and I discussed the many factors that should continue to drive oil higher over the next year. While many would like to attribute the rise in oil to the geopolitical developments in Iran, there are more global supply and demand fundamentals to consider.

Credit Suisse points to the world's dwindling inventories of oil as an example. Currently, the number of days of oil demand cover is at a low of about 57, the same level we saw in 2004 and late 2007. This low supply to cover demand means that any disruption in supply will likely drive prices higher.

We expect inventories to be further depleted, as demand continues, especially from emerging markets. Inventories for February and March should show a further reduction, as "oil demand growth was building positive momentum in the fourth quarter in all our regions except Europe," says Credit Suisse.

According to Bloomberg News, China plans on stockpiling more oil to reduce its local price fluctuations. Countries such as the U.S. generally store emergency oil to ensure their residents, businesses and manufacturers have plenty of stock at a price that's not too high.

As part of a three-phase program to increase its strategic petroleum reserves, China is building four emergency oil-storage facilities across western China, in the east and in the south. By the end of this year, its oil facilities are "expected to bring national crude-storage capacity to 270 million barrels" when construction is complete, says Bloomberg.

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