Market Note: Katrina and Oil Stocks

Now is probably the wrong time to try to make a buck on soaring energy prices. Sure, Katrina has pushed oil prices—and gasoline prices at the pump—higher than you might have figured. And that spells windfall profits for energy companies, especially big oil firms like ExxonMobil and ConocoPhillips. But these stocks have been surging for more than a year. Wall Street has priced in oil at $65 or so a barrel. For the stocks to be a buy now you have to expect oil to keep going higher. Yet as the waters recede around New Orleans and oil firms in the region get back on their feet and start pumping more oil, the near-term direction of oil prices—and energy stocks—is likely lower.

That doesn't mean there's no place in your portfolio for energy. Just that there's no rush to buy at this point. In the long term, demand from China and relatively sparse world production capability will keep oil prices moving up. But wait for at least a 10% dip in share prices before dollar-cost-averaging into the traditional energy sector. And be warned that prices could fall a lot farther than 10% if the world economy weakens. Which wouldn't be a bad thing, for consumers or investors. The next global slowdown will be the time to back up the truck and load up on a diversified mix of energy stocks or energy-oriented stock mutual funds for the long term.