Profit from the Peak featured on TheStreet.com

June 25, 2008 at 7:00 am
Contributed by: Chris

My book was featured on TheStreet.com on Tuesday, along with a short article I wrote for them about the facts of peak oil, and how most of the media are still getting it wrong! Here it is.


How to Profit From the ‘End of Oil’

Chris Nelder

06/24/08 – 02:18 PM EDT

If recent pronouncements about energy policy by the presidential candidates are any indication, America has a long way to go in understanding where we are, and where we’re heading.


Senator McCain and President Bush have both recently changed their minds about opening ANWR and the continental offshore to new drilling. McCain also wants to build 100 new nuclear reactors, and make a big push for so-called “clean coal.”


Senator Obama opposes drilling in areas where it is now prohibited and has dismissed McCain’s call for a summertime “gas tax holiday,” but supports a windfall profits tax for the oil industry and favors massive investment in renewable energy.


Meanwhile, the world waits with bated breath to see if the latest announcement on OPEC oil production will take down oil prices, even though the market responded to the last several production increases by bidding up oil further still.


A fine example of this was the emergency summit meeting convened unilaterally by Saudi Arabia on Sunday to try to assuage the oil markets. Many had hoped for a 500,000 barrel per day (bpd) increase. In fact, we got a promise for another 200,000 bpd of production — that’s an increase of 0.2%, yes, one-fifth of one percent. But that wouldn’t even make up for the loss last week of 320,000 bpd of Nigerian production due to bold militant attacks on a Shell RDS.Aoffshore platform and a Chevron CVX pipeline network. Consequently, the price of oil rose another one percent on Monday.


It seems as though hardly anyone understands the facts about oil, and about energy in general. The prevailing debate suggests that most people think the perceived problems and their solutions are essentially political, and that we could make our energy problems go away and jump back in our Hummers if only we put the right policies into place, or jawboned the right suppliers.


Nothing could be further from the truth.

Simple Math, Simple Answers


Once one understands the most current data and their trends, all of these questions are easy enough to answer.


Are we at the peak of global oil production? Probably, yes, but the right answer is, “We’re close enough that we need to do something about it, pronto.”


Drill offshore and ANWR as soon as possible? Bad idea. I say this not for environmental reasons, but simply from an investing perspective. It won’t help very much or for very long, it will take decades to come to market, and it will only put us farther out on the limb of fossil fuel dependency. It makes far more financial sense to burn somebody else’s oil for as long as possible, and save some of our own for a rainy day, when it will be in much greater demand and much more valuable. Judging from the gathering storm clouds of unstoppable oil prices and declining global oil exports, that rainy day is most certainly coming.


A hundred new nuclear reactors? Never going to happen. We’re going to be lucky to replace the existing ones, many of which are nearing the ends of their planned life spans.


“Clean” coal? Commercially, doesn’t exist yet, and probably won’t exist in any significant measure for several decades.


A windfall tax on Big Oil? Dumb, because big energy companies like BP BP and Chevron need that capital to continue investing billions in the energy technologies of the future.


A mandated production of biofuels in the midst of an oil-induced global spike in food prices? Painfully dumb, but that pain is mainly being felt in the Third World.


A gas tax holiday? So dumb that it’s an insult to our intelligence.


Obama’s call for a complete overhaul of our national energy policy (if you could even call it that)? Now we’re talking. I don’t know that he could or would pull it off, but it’s definitely the right idea.


Crisis and Opportunity


I believe the peak of oil is the most serious crisis the world has ever faced. And it’s already happening.


But the flip side of crisis is opportunity, so it is also the greatest investment event opportunity the world has ever seen.

My book (co-written by Brian Hicks), Profit from the Peak: The End of Oil and the Greatest Investment Event of the Century, is a careful study of all major forms of energy — oil, natural gas, coal, nuclear, all renewables, efficiency, the whole lot — their potentials and peaking profiles, and their investing angles. It’s packed with data and charts, but explained in layman terms, in the hope that anyone can come away from it equipped to understand the path ahead, and to know the right turns from the wrong ones.


My research points to the peak of oil right about now (2008 to 2010), peak natural gas around 2010 to 2020, peak coal around 2020 and peak nuclear by roughly 2025. All of the sources are public information, yet few seem to have caught on that we’re really looking at peak energy within the next 15 years.


While most of the world waits for prices to increase to the point where the inevitable changes are forced upon us by the market, the smart money is already hard at work on the solutions of the future.


Solutions Abound


In the book, I cover natural gas companies like Southwestern Energy SWN, coal companies like Arch Coal ACI, solar companies like First Solar FSLR, battery and fuel cell plays like Energy Conversion Devices ENER and wind turbine manufacturers like Vestas Wind Systems. All of their stocks are up 100% or more over the last year.


Emerging renewable energy technologies like geothermal, wave and tidal power, which I also explore in depth, are the next wave of stocks set to double and triple.


I can’t say whether the solutions will come soon enough, and big enough, to save us from pain and hardship. I can’t say whether the majority of Americans will still be driving around solo in their cars 20 years from now. But I can say with great confidence that those who do come forth with the right solutions at the right time are going to become incredibly wealthy, while enjoying the satisfaction of knowing that their work is crucially needed.


There is a reason why big oil companies like Chevron, BP and Total TOT have now admitted that the era of cheap oil is over. No, it’s not because they’re trying to bend you over a barrel, but because it’s the truth, and they need to get out in front of the issue after being behind it for far too long.


No conspiratorial theories are needed to explain why oil prices keep going up, and Congressional probes in search of manipulative speculation in the oil futures market are a waste of time.


It’s all in the data. The depletion of the world’s biggest and best oil fields, now well into their twilight years, is relentless. The world now struggles against a backdrop of a roughly 5% per year decline in oil production in order to manage any net increase at all. As we reach the end of the plateau at the peak — probably within the next two years — global oil production will enter an era of relentless and terminal decline.


What can be done now — indeed, what must be done — is a very long list, including:


  • Improve the efficiency of absolutely everything, from homes to appliances to cars.


  • Switch transport from roads to electrically powered rail.


  • Transform our entire infrastructure from one that runs on liquid fuels to one that runs on electricity.

  • Deploy renewable energy in any place where it works well, like solar in the Southwest, wind in the Midwest, marine energy on the coasts, and “universal geothermal” everywhere.


  • Relocalize our economies from top to bottom, including local food production and restoring our country’s manufacturing base.


  • And yes, squeeze every last drop we can get out of oil and gas fields.


  • My book is a warning, a guide, a reference, and ultimately a call to action (and hope). We have already squandered the 30 years we needed to adapt to the new energy regime and execute a nice “soft landing.” Our options now are much more limited, and we must pursue them immediately and vigorously.


    There is no time left to lose, but there is plenty of time left to profit, and we hope, to prosper.

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