They Own All the Oil, So What Will the Petro-Princes Buy Next? (Part 1 of 2) How About Potash Firms?

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National oil companies (NOCs) concentrated in the Middle East own more than 80% of the world’s known remaining oil reserves. In short, they’ve cornered the market. And yet, this year alone, they will rake in another $1 trillion from their oil exports, according to the U.S. Energy Information Administration (EIA). Even with pressing domestic needs (food, water, electricity) these countries and their sovereign wealth funds keep piling up billions upon billions of investible dollars. Where’s all that money going to go?

How about potash?

Next to oil, there may be no better way to put a choke hold on the global economy than by buying up every potash company in sight. As one analyst recently told a Canadian newspaper, “Potash minerals represent fertilizer, fertilizer represents food, and food represents political stability at a time when food scarcity has become a concern of governments across the globe.”

Thinking like a Westerner, shares of industry giant Potash Corp. might appear too expensive following the company’s recent sharp run-up. But thinking like a Middle East sovereign wealth fund, no price may be too high to gain control of this and other leading potash firms, given these companies’ interrelated strategic and economic significance. (Buy the world’s major potash firms and you’ll still be in control of the global economy after nations are finally forced to end their oil addiction.)

Middle East sovereign wealth funds might go on a potash buying spree, if only to prevent private equity and sovereign wealth funds in Asia and elsewhere from beating them to the punch. With China already reeling from record-high fertilizer prices, it wouldn’t be all that surprising if Asian funds in particular went after potash companies in a big way.

To be sure, nobody on Wall Street appears to be talking about any of this yet – at least publicly. And nations’ domestic political concerns could prove a roadblock to any acquisition binge. But investors may want to think about the possibility that one day soon the markets could wake up to news that a sovereign wealth fund either has or wants to acquire a big potash company, an announcement that likely would send the stock prices of other potash firms through the roof.

In addition to Potash Corp., publicly-held potash producers include: Mosaic Co.CF IndustriesAgrium Inc.Athabasca Potash Corp.Anglo Potash Ltd., and Potash One. Another company, Intrepid Potash, just went public.

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