With oil prices surging amid political unrest in the Middle East, the market is recognizing that barrels of oil come out of some pretty risky places in the world, Kenneth Hersh, co-founder and CEO of the Texas-based energy firm NGP Energy Capital Management, told CNBC on Tuesday.
"In Libya, unlike Egypt, there is fight going on and when you have significant bloodshed and you have what people might forecast as some sort of prolonged military or civil unrest, that has a tendency, as we saw once upon a time in Kuwait, to really damage oil fields," Hersh said.
"Our strategy has been to maintain a good, healthy, long position in the commodities. We do it using mid-level cycle prices. We don't plan on spikes because high prices have a tendency to create a drop in demand and then they correct," he added.
"When the risk premium gets backed into the price of oil, the whole curve will shift up, as we've seen it," Hersh said.
And with most consumers concerned about gas prices increasing at the pump, Hersh points out that overseas countries will be hit hardest.
"There's a difference between U.S. oil prices and global oil prices," he said, adding, "the U.S. is very well-supplied—in fact, the U.S. is oversupplied, so we won't see it in the gasoline pumps the way overseas will."
Over long periods of time, oil prices are generally moving in the upwards direction as a result of global demand coming out of emerging markets and the recovery in the U.S. and Europe, he said.
"Supplies are tougher and tougher to replace every year, in part because of political turmoil that's causing people to have to explore in far-off places of the world, where they may not be as welcomed," Hersh concluded.
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