Enjoy lower gasoline prices while you can. Forces are at work to boost crude oil prices again. That’s good news for energy sector investors, but bad news for inflation fighters and consumers of crude.

Oil is likely to get more expensive due to the confluence of escalating sanctions against Russia, the European Union’s embargo on Russia’s ocean-going crude oil, and imminent production cuts. Europe is bracing for a brutal winter of sky-high energy prices and shortages.

A pivotal event will occur Wednesday, when OPEC+ gathers in Vienna to discuss policy. The cartel comprises OPEC countries and partners such as Russia.

Analysts expect the cartel to announce a significant reduction in output of between 500,000 barrels per day (bpd) to 1 million bpd, probably at the upper end of that range.

Some analysts, notably Goldman Sachs (NYSE: GS), are predicting that oil prices could soon return to $100 per barrel. Supply already has been disrupted by the Russia-Ukraine war. The production cut would only make supply tighter.

News about the intentions of OPEC+ sent oil prices soaring Monday and they continued climbing Tuesday. Pain at the pump is poised for a comeback.

Speaking of comebacks, the major U.S. stock market indices on Tuesday rallied for the second consecutive day and closed higher as follows: the Dow Jones Industrial Average +2.80%; the S&P 500 +3.06%; the technology-heavy NASDAQ +3.34%; and the Russell 2000 +3.91%. All 11 S&P sectors finished in positive territory.

Among the market leaders both Monday and Tuesday were battered mega-cap tech stocks that currently trade at appealing valuations. The sliding value of the U.S. dollar and declining Treasury yields are giving investors an excuse to come off the sidelines.

Another impetus for the surge in stocks was a Job Openings and Labor Turnover Survey (JOLTS) report from the U.S. Labor Department on Tuesday that job openings in August totaled 10.05 million, a 10% drop from the 11.17 million reported in July and more than a million less than expected, representing the largest monthly drop ever. Layoffs also rose to the highest level in 18 months, though they remain historically low.

The latest JOLTS numbers mean that the Federal Reserve’s tightening is succeeding in slowing the economy. A cooler labor market will help dampen inflation. The betting now on Wall Street is that the Fed might pause rate hikes as early as December.

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Fears over an impending recession and concomitant energy demand destruction have been driving oil prices lower since mid-summer, as this chart shows:

But as always, you should keep your eye on the long game. Energy prices are starting to edge back up, and they could stay higher into 2023.

If you’re looking to invest in energy stocks, now could be the time to gain exposure, despite their recent run-up. If oil prices resume their upward trajectory, energy stocks (particularly exploration and production players) could enjoy further room for growth.

By the same token, rising energy prices would thwart efforts to contain inflation, which in turn spells higher interest rates and a contracting economy…and by extension, a deepening of the overall bear stock market.

The enemy of my enemy…

Russian President Vladimir Putin finds himself militarily cornered and internationally isolated, as his invasion of Ukraine continues to fail in spectacular fashion. Western sanctions are biting into Russia’s economy, which makes Putin increasingly desperate to finance his war machine. In other words, he needs more oil revenue.

Putin has his American admirers (some folks love a strongman), but make no mistake: he’s a ruthless authoritarian. His political enemies often fall victim to what some wags refer to as “tall building syndrome” (i.e., getting fatally thrown from windows). His economic mindset is kleptocratic, not entrepreneurial. He never undertook the hard, patient work of diversifying his country’s economy.

Russia is a petro-state that’s profoundly dependent on crude oil to keep its economy and government budget afloat. What’s more, Putin’s recent military conscription campaign has driven thousands of the best and brightest men to flee the country, amounting to a brain drain that will be felt for years. All of which is why the biggest cheerleader for a huge production cut in Vienna on Wednesday will be the Russian Federation.

Saudi Arabia, the de facto leader of OPEC+, has often squabbled with Russia on policy matters. No longer. The keffiyeh-wearing oil ministers of Saudi Arabia are making common cause with the ex-KGB colonel.

Mohammed bin Salman Al Saud, nicknamed MBS, is Crown Prince and Prime Minister of Saudi Arabia. To his detractors, “MBS” also stands for Mr. Bone Saw, for the way his secret police tortured, dismembered, and murdered a Saudi journalist critical of his regime. As it has done with Russia, the West has criticized Saudi Arabia for human rights violations.

Saudi Arabia and Russia, the dominant voices in the OPEC+ cartel, are eager to shore up oil prices as a matter of economic self-interest. But Wednesday also presents an opportunity for political payback against Western democracies, which Saudi Arabia and Russia view as sanctimonious hypocrites.

President Joe Biden in July met with MBS, to lobby for reduced production. November midterm elections are looming in the U.S. and high gasoline prices are a political liability for the incumbent party. Biden’s kowtowing to the Saudis (he greeted MBS with a now-infamous fist bump) was met with scorn by human rights activists and achieved scant success.

Oil prices have plunged since June, largely due to recession worries, but this dynamic won’t last for long. Efforts to curb inflation are about to suffer a major setback.

Position your portfolio accordingly. Maintain inflation hedges; keep gold in your hedges sleeve; and consider quality energy equities that still trade at reasonable valuations.

And for a stream of safe, stable income, I suggest you follow the advice of my colleague Robert Rapier, chief investment strategist of our new premium product, Income Forecaster.

Robert has devised a new investment formula that could hand you the retirement freedom you’ve always dreamed of, even in these tumultuous times. Robert’s methods make money, regardless of inflation, recession, or the machinations of oil ministers. Click here for details.

John Persinos is the editorial director of Investing Daily.

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