Thursday, March 31, 2005

Et tu, Brunhilda?

Norway Predicts Continued High Oil Prices.

Buy early. Buy often. Repeat.

Goldman Sachs joins the party with the high quote. There's another article with some reactions against here and a third take here.

Among other interesting tibbits:

- Raising price forecast in 2005 from $41 to 50, in 2006 from $40 to $55. Notice that they both raised the price target and flipped from suggesting 2006 goes down to suggesting 2006 goes up.

- They believe oil markets may have to endure a 'super spike' period where prices have to spike high enough to kill off demand, which could be as high as $105 and possibly $135 a barrel, based on what percentage of income/expenditure oil now makes vrs the amount it was back in the 80's. This is sort of an ass-backwards way of looking at it, but I like it. Gasoline may need to spike to $4 a gallon to initiate demand destruction.

- They remarked that the current oil environment looks like the 1970's.

I generally agree with this, but I'm not sure I agree on the $4 gas. I think $3+ gasoline on a sustained basis (4+ months) is going to alter the universe. These guys are in NYC after all, and NYCers don't know ^&%$ about gasoline.

PS. Yeah, me too, but I used to live elsewhere so I understand gas prices.


"We believe oil markets may have entered the early stages of what we have referred to as a "super spike" period -- a multiyear trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return," said analyst Arjun Murti.

``Perhaps the ultimate answer to high how oil prices need to go before demand destruction occurs is derived from knowing when American consumers will stop buying gas guzzling sport utility vehicles and instead seek fuel efficient alternatives.

``Based on our analysis of gasoline spending and the economy noted above, we estimate that U.S. gasoline prices may need to exceed $4 per gallon.''

Mr. Murti recommends adding to positions in the oil sector "at current prices, on a pullback, or even after rallies," and raised 2005 and 2006 earnings estimates across the board.

Send in the clowns.

But where are the clowns?
Quick, send in the clowns.
Don't bother, there here.

Over the past two weeks I've received three different investment newsletter type offerings via snail mail, shouting out things like "WHY YOU MUST BUY xxxxx NOW BEFORE IT TAKES OFF FOR 400, 500, 1000% GAINS!" and "xxxxxx ENERGY COULD SOON HIT $50".

They're pushing penny-type stocks.

I hate these things. I wouldn't go near them with a ten foot pole. Most of these eventually go to zero.

These 'newsletters' also blare the names and ticker symbols of these great picks, and so I suspect these are "pump and dump" schemes. They don't care whether I even subscribe, they just want me to take a look at the stock and buy some. Meanwhile, they bought the stuff back when it was 20 cents and are shoveling it out the door as quick as they can.

There's another guy published here with penny-type stocks. Again, I would stay away. Vestas Wind and Evergreen Solar? Sounds good right? Until you realize that both GE Energy and Siemens compete in both of those segments and the little guys appear not to be doing very well against them.

Additionally, with high gas prices, out come the crooks - er, clowns - with the 'amazing fuel saving device'.

Send in the FTC.

P.S. Put your penny-type money and your amazing fuel saving device money in a nice oil stock that you've actually heard of.

Wednesday, March 30, 2005

Free Kenneth Lay!

It's really too bad about them Enron boys. They was just a little early that's all.

And a little crooked. Though we didn't hear any of them comparing themselves to Nelson Mandela, did we Martha?

A WSJ article detailing how Wall Street is looking to ramp up energy trading operations titled "J.P. Morgan Hires 4 Executives
For Energy-Trading Expansion


J.P. Morgan Chase & Co., playing catch-up to some big Wall Street rivals, is pumping up its energy-trading business.

The nation's second-largest bank by assets after Citigroup Inc. said it made four new hires as part of an expansion of its energy operation.

In the past several months, J.P. Morgan executives repeatedly have expressed interest in expanding the energy operations. The investment bank has set aside $150 million this year to invest in top areas of growth, including energy and commodities.

Other Wall Street firms, such as Citigroup and Merrill Lynch & Co., also are planning to expand their energy-trading operations.

Tuesday, March 29, 2005

I just see ^&%$#@ ink blots!

When I read this article, the quote that stands out to me is:

WSW's Gue drew the moral: "Commodities ... present [...] investors with an outstanding once in-a-generation opportunity; these markets are just in the early stages of what's likely to be a major, multi-year bull market move broadly equivalent to the 1982 to 2000 bull market in stocks."

When another blogger reads it, the quote that speaks to him is this.

As they say, that's what makes a market.

PS. No criticism intended, that dude knows his stuff.

Oil sands development needs natural gas.

Turning oil sands into oil requires a lot of natural gas and there's some debate about where this is going to come from.

I believe that they use natural gas both at the front end and the back end in this process. In the front end, they use natural gas to cook the oil sands, and in the back end, they use it to upgrade the heavy crude end product with more hydrogen molecules to make it lighter and more desirable. They refer to it as 'light synthetic' in the end.

Among other interesting quotes from this article:

"By far the most important thing for North America are those oil sands in Canada," said Robert Esser, director of oil and gas resources at Cambridge Energy Research Associates in New York. "It's nice we're going to have access to (the Alaska refuge), but there are a lot of unknown questions there. We have no idea whether there is oil or gas or how much. In the oil sands, we know the reserves are huge, much larger than in Alaska."

"Imagine Saudi-type production levels just north of the U.S. border in a friendly country," said Roland George, an Alberta analyst with Purvin & Gertz, an oil industry consulting firm in Houston.

But environmentalists say the process of burning large amounts of energy just to get more energy is reckless. "The oil sands are the world's dirtiest source of oil," said Stephen Hazell, director of the Sierra Club of Canada's campaign against the Mackenzie pipeline.

[He's right.]

Although U.S. officials hope the output from Alberta's oil sands will be exported mainly south of the border, Chinese officials are trying to lock up long-term contracts for oil that would be sent through a proposed pipeline to the coast at British Columbia and then exported via tanker to China.

"There have been Chinese delegations in every skyscraper in Calgary," said George, the analyst.

"The Chinese are doing what the United States is doing, scouring the planet for every molecule of oil production they can get their hands on."

Many Washington conservatives are seeing red. "It's definitely a big worry for the Chinese to be trying to monopolize the oil sands," said Frank Gaffney, president of the Center for Security Policy in Washington.

"We're in a race for energy supplies, and we can't allow China to win this one."

David Dreman on Bloomberg 3/29/05.

Dreman is a pretty famous value investor.

The Bloomberg guys tried valiantly to get him to bite on other sectors as value, but Dreman seemed to like energy the most.

Among his observations: Even if oil goes down $5 or $10, earnings will be higher than expected for energy stocks.

Additionally, as he feels gas prices are having an impact on retail sales, he's not fond of retail.

Monday, March 28, 2005

Oh %^$#, somebody said "new era".

Another entrant for the Peak Oil Twilight Zone (as in "explain the concept, don't mention the name"):

The Dawn of a New Oil Era.

If I see an "it's different this time", I'm selling half.

Kenneth Deffeyes in NY Times.

Kenneth Deffeyes with an editorial this weekend in the New York Times.

Summary: ANWR is a drop in the bucket and diverts us from the real issue, peak oil. His calculations on Peak Oil suggesting late 2005 or early 2006. Suggested solutions: efficient diesels, wind, nuclear, conservation, coal.

Sunday, March 27, 2005

To invest, or not to invest: that is the question.

SmartMoney reports that Market Profile Theorems, which tracks insider moves, is now bearish on the energy sector, and rather bearish on the market as a whole. (I'm in agreement with them on the second part.)

Amusingly, however, their top stock pick is Kerr-Mcgee (KMG), and their top industries includes utilities - natural gas. (Carl Icahn's in agreement with them on the first part.)

I'm of the opinion that insider buys tend to be better signals than sells on individual stocks, but sales in large scale can be very convincing calls to get out as well.

Friday, March 25, 2005

The Energy Crunch to Come - Soaring Oil Profits, Declining Discoveries, and Danger Signs.

A well done, balanced article, click on the title to read it.

Oil barons and railroad tycoons get all the chicks.

Jeremey Siegel suggests Standard Oil and Burlington Northern Santa Fe for the long run?

Fear and loving of hot commodities.

A good article about a Canadian fund manager and commodities.

There is a mention of a clean coal stock called KFx Inc (KFX). I just looked into it, it looks very speculative.

While one director just made a purchase, the company makes no money, and the short interest is huge, which is generally an extremely negative sign. To see short interest, look at the linked page under "Share Statistics" at "Share % of Float"; currently, nearly a third of the stock available is sold short.

A news article is available from earlier this year on KFx.

When in Rome..

An article discussing the need to start work on alternatives to oil, particularly for transportation.

This is my limited understanding:

1 - Hydrogen has gotten the most airplay, but the idea that we will use hydrogen as a transportation fuel is B.S. for at least 30 years. Hydrogen is not found naturally in nature as a stand alone molecule, it's something you have to produce by separating it from what it's attached to. Among other options, you can produce it from natural gas or from water with the use of electricity. The conversion process is not terrificly efficient (option 3 is a more efficient use of electricity). Then you have to store it and distribute it, which is going to be a huge challenge. The stuff does not like to stay in one place unless tightly contained; thus it can't just be poured in your gas tank.

2 - Obviously, the interest in hybrid cars will increase as gas prices go up. There is a tradeoff in making a hybrid vehicle though, and some people argue it doesn't make sense to build vehicles with essentially two powerplants.

3 - Full electric cars are a strong possibility. They would be plugged in at night and charged off the grid. The cost of this 'fuel' from coal, wind, and nuclear power plants is actually not too bad (relatively speaking..), and the distribution is already in place. Additionally, nighttime is low power demand time.

4 - Natural gas and coal can be liquefied and made into something similar to diesel fuel, which would also allow retaining the current distribution infrastructure.

5 - If any of you are familiar with the micro cars of Europe and Asia, they are tiny and fuel efficient, but also fairly space efficient. In terms of safety, even with all the latest equipment, micro cars are still frightening when parked next to a full size American SUV, but when faced with the idea of paying $5+ a gallon for gas, micro cars start looking very appealing. If anybody at the top of Ford and GM has a brain in their heads, they are developing contingency plans to set up a cloned factory from Europe here in record time, when we hit these kinds of prices. I'm not saying it's around the corner, but they'd better develop the plans now.

6 - Finally, you can always get yourself one of these. If you've ever driven one, you probably know what I mean when I say you gain a whole new appreciation for driving.

Thursday, March 24, 2005

I see a Wal-Mart and I want it painted black.

An article in Rolling Stone titled "The Long Emergency" on peak oil by James Kunstler.

He's not one of the absolute worst case scenario folks, but he's pretty close. He maintains a blog with a R-rated name.

Though I agree with the concept of peak oil, I don't agree with a number of these ideas.

In particular, the worst case folks have a special warm spot in their hearts for the idea that peak oil means the end of Wal-Mart.

Somehow, I doubt it. I think Wal-Mart - aka the Cockroach of Retailers - is likely to outlive most of the rest of the retail landscape. Their ruthless, highly efficient distribution machine may use a lot of gas, but it's likely the last place people stop shopping because the cost equation, volume, and their general retail focus will work in their favor over that of other retailers with lesser volumes, higher costs and a narrower focus.

I think you can expect the landscape to be wiped clear of focused retailers (Circuit City, Office Depot, Winn Dixie, Toys R Us, various clothing retailers) well before Wal-Mart. And if Wal-Mart goes under, well, then the worst case guys will have been right.

Secondly, the suggestion that New England and the Upper Midwest will fair better than the Mountain States and Great Plains strikes me as fanciful. The costs of winter, in terms of items like heating, snow clearing, and road repair are enormous. The cost to maintain the infrastructure in colder climates is going to get very expensive; the further north you are, the worse it will be, and the states' tax burdens are going to get out of hand. And the Mountain States at least have some energy resources left.

Wednesday, March 23, 2005


If you read the FoxNews transcript of "Cavuto on Business" from this weekend, you see the following series of comments:

FOX on the Spots

Jim Rogers: U.S. invades Venezuela to "restore democracy."

Meredith Whitney: Congress softballs Social Security to play baseball hardball!

Herman Cain: Personal retirement accounts pass within 2 years.

Ben Stein: Forget scandals! Market is oversold & ripe for buying!

Gregg Hymowitz: Interest rates rise; more risk in the market.

Neil Cavuto: Oil stocks. I think they're priced for nirvana and there's nowhere for them to go but down, and the very fact everyone's recommending them tells you to get out of 'em!

But here's what was actually said at the end, based on my tape of the show:

Neil Cavuto: My own Fox on the Spot: Oil stocks. I think they're priced for nirvana and there's nowhere for them to go but down, and the very fact that everyone's recommending them, well Jim Rogers, you told me this, go the other way, right?

Jim Rogers: Well, I happen to think you're probably right for the short term, but only for the short to medium term.

How refined.

Jeff Dietert from Simmons and Company on CNBC earlier, he's their Director of Integrated & Refining Research.

His basic case:

The refiners are doing very well due to the historically high spread between heavy, sour vrs light crude. Historically the discount was $8, and now, as an example, Mexican Mayan trades at a $17 discount to light crude. The operating cost of the extra refining needed is approximately $1 a barrel, so the margin is big.

Because of the increase in demand for various refined products, increases in stringent fuel requirements around the world, the increase in supply of heavy crude, and the lack of complex refining capacity for the heavy crudes, certain refiners should continue to do well. When capacity is tight, they have significant ability to pass through their costs.

Thus, he suggests an overweight of the independent refiners, in this order of interest:


Sunoco - more conservative pick


He believes there's a 30% upside over the next 12 months, based on an average $15 spread between heavy and light crude.

As an aside, there was a discussion of a refinery that is in the planning stages in Arizona. The costs of building this are put at 2x the cost the market currently values the average public refinery co.

William Greehey, the CEO of Valero, was on later and quoted an $18 spread on Mexican crude and $1.50 in extra processing costs. He said he also expected to see oil prices stay higher for a long time.

The Tiger looking a little winded.

Exxon pulls plug on second Azeri field - SOCAR.

You're entering.. the Peak Oil Twilight Zone.

For a laugh, I've been discussing oil with people that are just on the outskirts of my normal circle of friends. I was amazed that nobody had even heard of the concept that oil production will peak some day, and what the ramifications could be. Not that I need everybody to be worried, I'd just like to see some awareness. And these are generally fairly intelligent people. On the other hand, I noticed yesterday that everybody had an opinion on the Terri Schiavo case, which has direct ramifications on pretty much nobody.

I guess it's some combination of denial, limited attention spans, the general gossipy nature of people, and the minimalist approach that the news is taking on the oil story. For while there have been many stories about oil and oil prices, generally they keep a wide berth around the peak oil concept. Sure, there have been stories about peak oil in the mainstream media, but in the average oil story it's not mentioned. It's like there's some kind of parallel world in which peak oil is allowed to be discussed vrs another one where it isn't allowed to be mentioned. This will change, but sometimes I feel like I'm on another planet.

Some articles of interest:

Have Oil Stocks Seen Their Peak?

Let high gas prices fill your portfolio's tank.

Energy Funds Shrug Off Talk of a Bubble.

Are funds abandoning tech for energy?

A brave new oily world.

High diesel prices drive truckers crazy.

Wall Street Over a Barrel.

Oil's Surge Ignites Cost Increases For Products From Plastics to Shoes. [$]

Here's one that actually mentions it. But then, if you live in Minnesota, you've really got a lot to start worrying about.

Worries swelling over oil shortage.

Monday, March 21, 2005

Recommended Resource.

I got the latest energy brief from the Guinness Atkinson Global Energy fund. You can sign up to receive it via e-mail here.

If you're interested in investments in the energy sector, I highly recommend you sign up for the newsletter, it is very good and contains a nice overview of events in the energy markets, the fund manager's musings, and the portfolio's holdings.

There are not a lot of energy focused funds out there, so if you're interested in one, I'd take a look at this one.

There are others I like, but there are problems with them. Vanguard Energy is currently closed to new investors, and AIM Energy and Blackrock Global Resources both have loads.

Note: This link is to last month's Energy Brief.

Oil as currency?

Today the dollar went up, gold went down, and oil went down a tiny bit though OPEC found a little more in it's cupboards. Normally, when the dollar goes up, all commodities have a tendency to fall.

Oil as currency?

The Chinese kinda think so.

Peter Thiel - Tar Baby.

Peter Thiel was a co-founder of Paypal and is currently President of hedge fund Clarium Capital Management. Mr. Thiel appears fairly regularly on CNBC, I suspect because he's both an articulate guest and been spot on accurate in most of his predictions. Clarium must be doing pretty well, because the last I heard they had $250 million under management and now CNBC is quoting $400 million. (More background info from Bloomberg.)

Mr. Thiel appeared on CNBC last week and discussed energy, which he is bullish on.

"We are at the start of a secular bull market in energy. I think it's really just getting started. The issue is not the spot price, which is where you always have the headlines, it's been $56, $57, but it's what's been happening in the long dated prices, you go out to 2010, 2012, energy futures have been steadily moving higher and higher. And I think what you want to do as an investor is invest in oil companies that are going to be producing a lot of oil five, ten years from now as the oil majors are starting to run down."

Although there are a number of companies in this space, he recommended three in particular because he believes they have the most potential if oil prices rise substantially.

In his words: "These three we like because they have the most, sort of, upside optionality so that if the oil price actually does go through the roof and stays as high as it is and even goes higher in the years ahead, these are the ones that will profit the most on a per dollar basis because they have the potential to dramatically expand their oil production and their reserves. And this is one of the big challenges the oil majors have, when you look Exxon, BP, Shell Oil, even though they're great companies and probably still somewhat undervalued, the big challenge they have is replacing their reserves and when you look ahead 5, 10 years from now, that's going to be the enormous issue, where are you going to be finding this extra oil. We think Canada is the only stable developed country in the world that has the potential to expand it's energy production really in a meaningful way."

Opti Canada - OPCDF (Canada = OPC Toronto)
Western Oil Sands - WTOIF (Canada = WTO Toronto)
Nexen - NXY (Canada = NXY Toronto)

More on tar sands in an article from Wired last year.

Note: Tar sands and oil sands are sort of interchangeable terms, though they carry slightly different connotations. I read somewhere that the Canadian government prefers the term 'oil sands' over 'tar sands' because it sounds cleaner.

PS. The title is a play on words, it's not meant to be a knock on Peter Thiel and not meant to be racist.

Sunday, March 20, 2005

Dance with who brung yu.

I should probably have done this earlier, but I'd like to explain why I have this blog and what I'd like to do with it.

As I've overweighted the energy sector in my personal portfolio, I want to make sure I'm tracking the story (story defined as energy e.g. oil, natural gas, coal, peak oil, etc) as closely as I can. I try to read as much about the topic and catch as much commentary and discussion on radio and TV as I can. I originally tried to track things by mental notes and some written notes, but this blog has turned out to be much more useful in this regard.

Among other things I try to keep an eye on:

1.) The opinions of experts, with particular emphasis on those that I have found to be correct in the past and those that argue against me.

2.) The general thinking on energy, both in the mass media and among the general public.

3.) News developments in the energy sector.

The goal of all this is to triangulate these various inputs and figure out where that leads me in terms of buy, sell, or hold.

So when reading this blog, please keep in mind that I may well own some of the stocks I mention, probably agree with many of the experts I choose to mention, and though I try to keep an open mind and am looking for dissenting opinions, I am as subject to bias as anybody else.

It's tough to stay on top of everything, so probably I'm going to evolve to focus mainly on #1, tracking those who brought me to the party.

Thursday, March 17, 2005

Gone fishin'

Tough day not to post commentary, but I'm real busy and for a day or three I think it makes sense for me just to shut up, listen, ponder, in no particular order.

See ya in a few.

Wednesday, March 16, 2005

File under: Undecided.

- It turns out that speculators may not have as much to do with high oil prices as was, er, speculated.

- It turns out that oil is volatile. Oppenheimer analyst Fadel Gheit now saying oil may go down to $30, after recently saying he saw it going higher. Mr. Gheit, though a widely quoted analyst, is not one of the people I choose to track. I felt last year that his analysis was too wishy-washy. I feel even more so now that I'm paying closer attention.

- Then there's this article from I'm not entirely sure what it's trying to say, and there seem to be some dangling thoughts, but it seems potentially interesting, so I thought I'd mention it. What I think the guy is trying to say is:

a) Oil companies are reluctant to invest in high capital projects for fear of having the cheap producers (OPEC) then overproduce and destroy their investments.
b) It is unknown whether this is good or bad for these companies. It could be short term good, long term bad.
b) Oil futures suggest the current high price of oil is not a bubble.

[Since there appear to be more things going on in that last article, I wouldn't be shocked to find I completely missed the point he was trying to make. Or even that I drew the wrong conclusions. This guy reminds me of some of my college professors.]

It gets interesting.

1.) OPEC manages to cough up a little extra, but:

``What will happen after the OPEC meeting is that they will all be producing at capacity,'' said Kenneth Deffeyes, professor emeritus of petroleum geology at Princeton University and author of the book Hubbert's Peak: The Impending World Oil Shortage.

``OPEC is irrelevant,'' Deffeyes said in an interview in New York. Saudi Arabia has little or no production capacity beyond what it has been using in recent months, and pumping fields faster may damage them, said Deffeyes, who predicts that global oil output has peaked and will begin to decline.

(quote from Bloomberg story above)

2.) A Congressman makes a presentation on Peak Oil in front of the House.

3.) Stephen Leeb has a target of $250 a barrel in 6 - 9 years.

4.) The folks who brought you the head of Enron on a pike, now bring you the heads of the major oil companies on a pike.

5.) Lehman Brothers joins the party.

6.) Hubbert comes home.

Tuesday, March 15, 2005

Dr Strangelove or: How I Learned to Stop Worrying About Peak Oil and Start Making Money Off It.

On a whim, about a year and a half ago I picked up a copy of the book "Hubbert's Peak". The idea was absolutely mind-boggling. Oil would eventually become scarce? Did the rest of the world know this? Did they know that experts thought we might be near the peak?

I checked the web. Whoa. Scary stuff. End of the world at hand. [But apparently not so at hand that one guy didn't want to sell me a book and a DVD on the topic. Sorry dude, if the end of the world is at hand, I'm gonna need something downloadable, you know what I mean?]

Quick, what was that stuff I learned in college? Oh yeah, supply and demand. When something gets scarce, prices rise, demand maybe goes down, hopefully supply goes up, etc. But wait, I know no more oil supply is to be had.

&^%$, this is gonna be mighty profitable!

Needless to say I immediately put some money into energy.

Then a few months later I heard Jim Rogers on FoxNews announcing that oil would soon skyrocket and viewers needed to get informed. Literally everybody on the show laughed at him.

My jaw dropped.

One of the world's great investors was apparently thinking along the same lines.

I read more. "Out of Gas", "The End of Oil", "The Oil Factor". Jenna Jameson's book. [Okay, I only looked at the pictures on that last one.]

Holy Gas-Guzzling Batmobile, Batman!

Anyway, that's my story. Figure out your own. Do you believe the peak oil theory? Do you think the world is done for? If so, no need to invest. But if you think there's a good chance we muddle through, think about investing. As always, your mileage may vary. (Pun.. you know the drill.) As we are in front of a seasonal slowdown in demand in the spring, you may want to look for a break in the price before investing.

And for your reading pleasure:

"In short it is a good time to be in the energy business. It is also a good time to be an energy investor. As to those skeptics that keep waiting for $20 oil, the world is passing you by. It is time to recognize that a new bull market has begun. It is time to revalue and compare the returns offered on traditional equities to the returns offered on hard assets. It is also time to reallocate your portfolio. As for the energy cornucopians among you, it is time to familiarize yourself with “peak oil”  – it has or will soon arrive."

Quote from an article I'm going to call Hakuna Matata

Monday, March 14, 2005

Now at Bat: The Mighty Economides.

Michael Economides is a Professor of Petroleum Engineering at the University of Houston. He is also co-author of the book "The Color of Oil" and is interviewed on CNBC fairly regularly.

He was on CNBC last week and made the following comments/observations:

Venezuela - Hugo Chavez is a much graver threat to America's energy security than Saddam Hussein ever was. He's got one motivation, hurt the US, and he's playing it to the hilt. For example, they could sell Citgo (a refiner and retailer owned by Venezuela with a decent size presence in the US) and then turn around and sell their heavy crude oil to China, letting the Citgo assets rust. The Chinese are flush with cash and desperate for oil, but there is a shortage of VLCCs (very large crude carriers - big tanker ships) that would be available to carry this oil.

The Perfect Storm - This is the first time since 2000 that we have reached supply/demand equilibrium in oil, and the equation is getting worse. OPEC has no excess capacity currently, though they could work on increasing production, Russia has problems, Venezuela.., the Saudi oil minister abondoning any nonsense about $25 oil.

Some direct quotes:

"There are still people - quote unquote - analysts, that are still talking about $25 oil, which is proposterous. I would say, let's get used to $50 - $60, and I think sky's the limit. You realize, there are all sorts of things that can happen that can shoot the price overnight to the numbers that you were talking about a few minutes ago." [They were talking about $80 oil with the guest host earlier.]

"The Russia situation has reached Greek tragi-comedy. They just make the rules as they go. They're fighting amongst themselves, right now the two national oil companies, Rosneft and Gazprom, fighting over the remmnants of Yukos, which Putin's own chief advisor called 'the theft of the century'. So you start looking at the Russia situation, and it has all the makings for a disaster."

"It's possible that we can actually take a whiff of $80 oil, but I would say, let's accept the $50 - $60 as the range that I think I am going to see for quite a while."

[Note: I've been following oil closely for about a year now. The people I choose to quote are the people who have generally been correct in their predictions over that span. There are people calling for oil to come down, but they have generally been wrong over the past year. When I hear the folks I have been tracking talking about oil going lower, I will post that. ]

Sunday, March 13, 2005

Yogi Bera Al Sabah (5th cousin of Kuwaiti oil minister, lives in Queens): "It's over."

Kuwait now saying era of cheap oil ('under $40') is over.

PS. Al Sabah = Kuwaiti ruling family.

Asia's Energy Resources are Inadequate

This is from Barron's online [$], a reprint of a Banc of America piece:

Banc of America Securities
40 West 57th Street
New York, New York 10019
(Tel) (646) 313-8791

MARCH 11 – We believe higher world oil prices will loom large over the financial markets for some time to come, an assumption primarily underpinned by Asia's growing thirst for oil.
Simply put, in a region that is home to more than half the world's population, on the cusp of an automobile revolution, at the threshold of a boom in urbanization, and at the forefront of global manufacturing, Asia's energy resources are grossly inadequate.

In terms of proven oil reserves, Asia's reserves equate to a drop in the bucket. Indeed, the region's share of global reserves was just 4.2% in 2003, the last year of available data, down from 5.1% in 1993. Currently, Asia has reserves equivalent to just 16.6 years of current production rates.

In terms of reserves to annual consumption, the picture is worse: China and India together have approximately 10 years of remaining oil reserves based on consumption levels in 2003. That's not a comforting thought considering the secular industrial rise of Asia's twin giants.
However, in terms of oil production, Asia's annual output is significant. Indeed, the region's production in 2003 outstripped that of the United States as well as the combined oil output of South America.

China, moreover, is the largest oil producer in the region, accounting for 43% of Asia's total production in 2003. That said, however, Asia's overall oil production fell 1% in 2003, with sharp declines reported in Australia and Indonesia. That helped drag Asia's global share of world oil production down to 10.2% in 2003 from 10.7% the year before.

Juxtaposed against falling oil production in Asia is surging regional demand.

The region's thirst for energy has climbed steadily over the past decade, rising from 15.9 million barrels per day in 1993 to more than 22.6 million barrels per day in 2003.
In the process, Asia's share of global oil consumption has jumped from 24% of the total in 1993 to 28.8% a decade later. During the same period, China's share of world oil consumption has doubled, from 4% of the global total to over 8% as of 2003.

In the end, the imbalance lies with Asia's soaring demand for oil on the one hand, and declining regional production on the other. This disparity represents another side of Asia's economic rise and continued integration into the global economy that bears watching.

As millions of people in the region move from the farm to the city, become integrated into the global economy, and find the wherewithal to purchase an automobile and/or travel by airplane, the strain on the global supply of oil should only increase. Asia's oil gap should then only grow wider, placing more upward pressure on global energy prices.

The upshot: until the global supply of oil catches up with Asia's soaring demand, $50 per barrel oil may well remain the rule, rather than the exception.

Stay long the energy sector.

--Joseph Quinlan, chief market strategist

What goes up quickly..

The North Sea fields, which lie in the ocean sort of midway between England and Norway, were discovered in the 1970's, which is somewhat late in the oil discovery game.

As a result of a number of factors (being found late in the oil discovery game; being located between two countries interested in their development; having been developed by Western oil companies; because they were used to offset the power of OPEC) these fields were developed with some of the most advanced technologies available.

What was the result? They produced a lot, and they produced very quickly.

This is the unfortunate end result.

[Here's something I've been wondering: Does the application of advanced technology affect Hubbert's Peak? I mean, with most of the big fields being on the older side, and having brought in advanced technologies say, 1/3 or 1/2 way into their lifespans, does it possibly change the shape from a bell curve to something different? Maybe say, the shape of a children's slide. Only with the steps leading up (the steeper incline) on the right side (after the peak). I think they have made some adjustments for this in the current models though. I'll have to read up further.]

Saturday, March 12, 2005

NY Times to Long Island: "Good luck with that Peak Oil thing.."

The New York Times puts an article on the peak oil documentary "End of Suburbia" in the NY Region/Long Island section.

Update: Here's a copy of the article that doesn't requiring registering.

Out Of Gas.

An excellent lecture by Dr. David Goodstein of Caltech. Note: It's long and uses RealPlayer.

He's also the author of the book "Out of Gas: The End of the Age of Oil", see link in sidebar.

Pump up the volume.

Video on how oil affects the economy from CNBC.

Mutual fund suggestions for the commodities boom also a video from CNBC.

Forbes mentions peak oil? (But keeps up a distance: 'so-called Peak oil crowd'.)

Friday, March 11, 2005

The dominoes line up..

World demand

General Motors

Delta Airlines

US Airways, Independence Air, America West

The Texas Railroad Commission Announced Today The Removal of All Production Caps.

The fat lady sings?

P.S. The Texas Railroad Commission was the OPEC of United States oil production. It's announcement of unlimited production quotas for producers in the 1970's was a sign that US oil production was peaking.

Thursday, March 10, 2005

And now a word from our sponsor.

I'm sure you've noticed there are a few ads to the right of this blog and some links to related books at Amazon. If you click on those links and buy something, I get a little cash.

Here's what I'd like to say about that:

If you do decide to buy a book on one of the topics based on what you've read here, it would be great if you could buy it through the link at the right, which, again, will send a little cash my way.

In terms of the other ads: If you see something involving limited partnerships, **please** run it by an attorney or financial advisor before investing. If you have only a small amount to invest, penny-type stocks are not your only option, you can buy fewer shares of a big, well know company or dollar cost average into a mutual fund.

One ad that I thought was very appropriate for this site was the Guinness Atkinson Funds (which, naturally, seems to have stopped running). They have an energy focused mutual fund ("Guinness Atkinson Global Energy") and the person running it seems to be on top of the general story. If you see their ad (labeled "GA Funds"), click on it and go read their "Investment Research". They also send out a monthly newsletter that gives some additional commentary and lists the fund's positions. You can sign up for that on their Investment Research page.


Sun Tzu on Oil.

"Keep your friends close, and your enemies closer."

Friends: John Roque of Natexis Bleichroeder on CNBC - a technical analyst - saying because the oil stocks have been so underowned for so many years, the latest moves simply reflect people having to pay up to get in. He is looking for a pullback to moving averages (50 or 200 day), and he feels that would be a good place to add to or start a position. In addition, he discussed the idea that at 8% of the S&P 500, energy stocks have room to grow, while financial, at 22%, ... he didn't really say, but I think you get the idea.

Enemies: Bubble, bubble, oil and trouble. It's always important to understand the case against your position.

Wednesday, March 09, 2005

A bear, the Pope, and a technical analyst go into the woods..

If a technical analyst is in the woods studying a tree falling chart, would he recognize the tree falling on his own head before or after it clocked him?

Traders are already calling for a double top in the price of oil, which is generally a bearish sign. A double top is when the same ceiling is hit twice and each time the price reverses course. In this case, oil has now twice hit $55.xx and not gone beyond it. (Except for maybe tomorrow or the next day, or next ?)

There's an article here with various charts, the point being made is that the oil stocks look like bubble charts.

Anyway, this may well tell us something short term, but we know the story longer term and that's what makes it interesting.

I'd rather know the story longer term.

[Several large block trades in XOM at the end of the day. One day we'll know who bought and who sold.]

And the Oscar for "Best Prime Time Mention of Peak Oil" goes to..

Fox's Alias, where Sydney's dad just mentioned Peak Oil at the dinner table.

I was wondering when I would see a mention of Peak Oil on mainstream TV or in a movie, and this is it. If anyone hears of more, feel free to add it in as comments.

It's kind of amusing that I mentioned Jennifer Garner in an earlier post.. (Hmm, how about I mention I ran into a million dollars.)

An extra credit question: When plotting Alias episodes, do the writers first figure out what they want to dress Jennifer Garner in, then come up with the story, or is it the other way around?

Update, with dialog:

After one character mentions hybrid cars, Sydney's father responds

Well, considering the rapidly growing demand for fuel in nations like
China, India not to mention the world's oil production is expected to
peak in the next five years and then sharply plummet, I think it's pretty
clear were looking at an exponential rise in the global conflict along
with an energy crisis of unfathomable proportion. So, yes, I'd say a
hybrid is an excellent idea.

Where's the ^%$# graphics?

USAToday article worth reading on investing in energy: "Energy stocks power markets."

Tuesday, March 08, 2005

John Segner on Bloomberg TV 3/8/05

John Segner runs the AIM Energy Fund, which is one of the top performing energy focused mutual funds over the past few years.

He was interviewed today on Bloomberg TV on oil, and among the points he made were:

- He believes we are currently at 84 million barrels a day of demand, 85 million barrels a day of potential production, leaving only 1 million barrels in excess capacity. This is very low, 20 years ago demand was at 58 million barrels a day and we had 25% excess capacity. Supplies right now are running 4% higher than average, and inventory is currently adequate. However, if demand continues to grow on trend, we will add an additional 1 million barrels a day of demand.

- Generally this time of year there is a seasonal period of weak demand ahead of us, which could lead to short term weakening in oil prices. It may not happen this year, due to strong economic growth, but it is normal.

- So far this year his fund is up 22% or so, but that is 'not the way the world works', and he expects a period of consolidation, which shouldn't be a big concern, and he feels it will be a buying opportunity. He expects we will likely be higher by the end of the year.

- The second half of the year should see an uptick, and he is very positive on the longer term outlook on energy.

- Oil service stocks is where he believes the highest earnings growth lies, while exploration and production companies are the most overpriced and the most likely to stall in the near term.

- He was going to present 3 interesting stocks, but there was only time for one, ConocoPhillips, COP, which he believes is cheap at 10x earnings.

[It drives me nuts when Bloomberg cuts their guests off abruptly. It's always when it's just getting interesting.]

Stephen Leeb on Bloomberg 3/7/05.

Stephen Leeb of Leeb Capital Management and the author of "The Oil Factor" (see link in sidebar) was on Bloomberg radio yesterday.

Among his observations on oil:

- The December deferred contracts are at new highs, suggesting oil isn't going to drop deeply in price.

- When asked when he would become concerned about oil prices and their effect on the economy, he suggested this would start at $65 a barrel.

- When asked if we were at the point where he would suggest avoiding oil stocks, he said no.

- Wall Street oil analysts are still forecasting a decline in the price of oil to $35 - $38 a barrel, where oil companies would still make healthy profits, but because of the chronic gap in potential supply vrs potential demand, Mr. Leeb doesn't agree with this thinking.

- He believes that for the next 3 -5 years oil stocks will still be an attractive investment area.

You can read an interview with him from about a month ago here.

Thankfully, it's not a cover story.

A good negative article on oil stocks in Business Week.

I say good because:

- Skepticism is always good. (Somebody has to be the last person to buy..)

- The article is short term negative and long term positive.

Oil futures market sort of gets it.

An article [$] in the WSJ about the oil futures market, pointing out that because oil futures are pricing oil much higher than they used to, oil may stay high for a while to come.

The funny part is that while oil near term is in 50's, further out it's trading in the 40's.

The even funnier part is that analysts are expecting oil further out to drop into the 30's.

In the past 3 years oil analysts have been too low on oil prices by 22% on average.

Here's a quote from the redcoat:

"I used to think, forget it, $40 oil is not sustainable," says Oppenheimer & Co. energy analyst Fadel Gheit, a 30-year industry veteran. "It has to come down from there. That's what I was taught. But things have changed. The center line for oil prices is clearly moving up."

P.S. I never see any mention of peak oil or future falling global production in these stories. December 2010 oil future in the 40's? I should look into how to buy a few of those.

Merger Activity May Heat Up Oil Sector.

I bolded one line, make of it what you will. A piece of a report from Bear Stearns on the oil sector.

Bear Stearns & Co.
383 Madison Ave.
New York, NY 10179
(Tel) (212) 272-2000


"We believe the oil industry is about to go through a period of heightened acquisition activity.
Companies are flush with cash, commodity prices are high, interest rates are low, and corporate raiders are agitating oil company managements.

The oil and gas reserves that underlie several oil companies' stocks can be purchased at prices below finding and development costs.

Our screens sift out possible acquisition targets. Unocal, Murphy Oil, Marathon could be takeover or restructuring candidates.

Unocal remains our top takeover pick. We have increased our year end price-target from $55 to $70 per share.

We have upgraded our rating on Murphy Oil from Peer Perform to Outperform with a price target of $120 per share.

Our rating on Marathon Oil is upgraded from Underperform to Peer Perform with a price target of $55 per share.

We remain cautious in our oil price outlook and believe that prices are likely to fall sharply.

In our opinion, oil companies would be better off returning free cash flow to shareholders.

However, we suspect some company managements will not take our advice. We think consolidation will be the next wave in the oil industry."

Frederick P. Leuffer

Energy complex repriced for mid 40's oil.

It's important to read the opposing viewpoint, like this one. I thought energy would do very well this year. I didn't realize it would do something like +20% in two months. Tough to figure out whether and how much to let go here.

I think that latest move where the stocks went vertical was a repricing of the whole energy complex as people got comfortable with oil staying above $35, and thus gave every company credit for a 33% rise in revenues. ($35 + $11 = $46, somewhere in the mid 40's may be the price of oil for this year)

Imagine if Intel or Dell came out and said it can sell everything in it's inventory and everything it could make for the year for 33% more than it thought!

I saw an add in the paper this weekend where Dell is offering a nice PC with a flat panel display for under $500. Do I really want to own even the most efficient company in a field where the prices appear to be heading relentlessly toward zero?

In the short term, Jim Cramer on his radio show yesterday called for a rotation from energy to tech, likely to last a few weeks.

I also ran across an interesting trading oriented blog, Alchemy of Trading, where the writer is trading oil stocks among other things.

Jim Rogers on oil.

Jim Rogers suggesting this weekend on FoxNews that "Oil rises to $100 in the next 5 years!"

An older article with more info on his book (see link in sidebar) here.

Monday, March 07, 2005

Attack on Iran?

The usual suspects are talking about an attack on Iran to commence [looking at my watch..] anytime soon.

I don't have a great deal of knowledge on this, but my gut says this is (to quote Jim Rogers) balderdash.

Some good things appear to be blooming in the Middle East, and I just don't see that we are going to throw everything into complete turmoil by attacking Iran. Instead, I think we wait for things occuring now to bear fruit and see what further changes may radiate out from there.

Since the call on this is for it to begin 'within months', I guess it won't be long before we know.

Richard Heinberg, as far as I am concerned, is a one trick pony.

There's more of this type of thinking here.

Bob Brinker peak oil caller.

Bob Brinker got a peak oil caller this weekend.

The gentleman mentioned that he had made some good money in oil stocks over the past few months and he wanted Bob's opinion on oil stocks and what to make of a possible peak in oil production and the implications of that in terms of investing.

General investment advisors don't want to touch this with a ten foot pole, and, as such, Bob answered that he doesn't make those types of market specific calls, and that his approach was to 'invest wisely', focus on diversification, and build inflation protection into the portfolio. He then went on to mention his general outlook, that we are in a secular bear market (secular = longer term, overriding trend) since March 2000, and we are currently in a cyclical bull market phase. [He made a couple of nice calls on both of those in 2000 and 2003.]

That said, I'd be really curious to see what Bob's own portfolio looks like.

Saturday, March 05, 2005

What would Warren do?

Warren Buffet has already made some investments in the energy sector, in two forms that I am aware of.

BK (Berkshire Hathaway, WB's company) owns $1.25 or so billion of Petrochina (PTR), one of the Chinese oil companies, which holds a very nice amount of reserves. He bought this at significantly lower levels, however, and could be letting some go these days.

He also bought MidAmerican Energy, a utility that owns natural gas pipelines and is also building one of the larger wind farms in America. If you like that idea, take a look at Florida Power and Light (FPL), which is also developing significant wind farms.

How they play the game.

India makes a deal with Venezuela. Man, the shippers must really be loving this. [TK, GMR, OSG, TNP, FRO etc]

Chavez suggesting that if the US again doesn't send him balloons on his birthday, he's really going to get mad.

India and China compete for oil all around the globe.

All part of the game folks.

Friday, March 04, 2005

Fire Sale on Iran Invasion.

Well, let's see..

The Iranians say that if we attack them, oil will rocket to $70 a barrel.

But according to the acting secretary general of OPEC, oil could go to $80 anyway.

[P.S. The news needs to stop quoting every wacko with an opinion.]

Bush: "Ich bin ein Albertan"

I am not really of the mind that Bush is all about rounding up the world's oil supplies, but a lot of other people are, and you can read speculations about it here and here, and further conspiracy theory here.

The pipeline thing, by the way, is happening in several places. The Caspian Sea, Europe, and Siberia, where Japan and China are tusseling over who ends up at the receiving end of one.

Anyway, yes, I think oil is part of the equation of what we are doing, but no, I don't think it's the grand plan. I just think it happens to kill three birds with one stone. (Terror, Middle East peace, and access to oil on the free market.) And you know what, if we weren't doing it, you can bet that China would be out there in much fuller force than it already is.

Finally, when you're in charge of the largest economy in the world, which is also the world's largest oil consumer and the world's largest oil importer, the reality is that you're going to have to knock a few heads around.

Plan B.

LNG and CNG are probably plan B.

Methane hydrate is very spec, but probably less of a spec than hydrogen at this point.

How to play the game.

Oil companies seem to be getting more comfortable with the fact that oil prices are going to stay on the higher side. So we may see more deals as they gobble each other up.

Who are the logical candidates at this point? The small guys and especially the guys in the middle that have large reserves or leases.

Articles on this here and here.

I think a stock I own, CHK, might also be a possibility. [Note: I was very happy to see the CEO of CHK buying stock above where I bought it. I can't remember the last time that happened to me.]

There are lots of other guys in the middle, XTO, XEC, PXD, NFX, APA, MUR, the list just goes on and on. You'll have to do some due diligence and see if you want to play.

A firm named "Ehrenkrantz King Nussbaum, Inc.", which I have no knowledge of, is quoted in Barron's as suggesting these firms might be tempting targets:

Patterson-UTI, Key Energy, Occidental Petroleum, Noble Energy, Anadarko, Vintage Petroleum, Ultra Petroleum, Plains Exploration and Production, Chesapeake Energy, Kerr-McGee, and Petroleum Geo Services.

Good luck.

Thursday, March 03, 2005

Attention: Chinese Fire Drill in Progress.

Among other weirdness:

"Acting OPEC Secretary-general Adnan Shihab-Eldin said the possibility of oil prices rising to $80 a barrel over the next two years is highly unlikely, but he couldn't rule out the chances of such a steep spike, Kuwaiti daily Al-Qabas reported, Dow Jones Newswires said."

Inventory data all over the place.

Refinery outages.

Maybe OPEC will cut production, maybe they won't, maybe they'll send more sour crude, but in the end, everybody's confused.

WSJ reporting [$] that Unocal (UCL), Occidental (OXY) and Devon (DVN) may be takeover targets, with ChevronTexaco (CVX) and maybe Shell (RD) looking at UCL in particular. This is after earlier reports that a Chinese company was interested. CVX apparently sitting on $9.3 billion in cash and it's reserves replacements haven't been sparkling. [Note: not an invitation to buy UCL, it's already trading up.]

Confusion in Bolivia over it's development of it's large natural gas deposits.

WSJ reporting [$] the Russian government consolidation of it's holdings in Gazprom close to done. Gazprom has 117.3 billion barrels of oil equivalent reserves, vrs # 2 ExxonMobil at 21.2 billion. #3 is Lukoil (also Russian) at 20.5. Now do you see what Putin's up to?

Reports of worker shortages in the oil patch. Not only can't they find enough fields, they can't find enough people to work 'em!

A good article with a take on investing in oil companies currently.

US Department of Energy starting to talk about how to mitigate Peak Oil. This sounds more like a research paper they may have (accidentally..) funded than a DOE document to me.


"In the developed nations, the economic problems associated with world oil peaking and the resultant oil short-ages will be extremely serious. In the developing nations, economic problems will be much worse."

"World oil peaking represents a problem like none other. The political, economic, and social stakes are enormous. Prudent risk management demands urgent attention and early action."

Coal as the new black gold? Say it ain't so..

Are we at a historic moment? I'd say so.


"But I would bet that the advance is far from done, even as crude oil nears its historic high of $56 per barrel this week. For even though half of the top-gaining 25 stocks in the S&P 500 this year hail from the energy sector, they still represent just a tiny fraction of that market proxy -- and of most investors' portfolios."

Wednesday, March 02, 2005

A sign?

The WSJ reports [$] on page 1 today that Morgan Stanley has ramped up it's oil and energy operation to the point that it is a major provider of heating oil to wholesalers in the northeast and is acting as an intermediary in the oil market for United Airlines. [Hope you're getting cash on the barrel there guys.]

Morgan Stanley running a fuel operation for an airline?

That's either a market top sign or a very bullish sign.

Well, let's see..

If it was Merrill, we'd know it was a market top.

If it was Goldman, we'd know it was bullish.

MS, I'm going to give them the benefit and go with the later.

Thank God it's not Bear Stearns, or there'd be water in the gas.

Moon over Parador time?

Another blogger doing some nice work tracking China's quest for oil in our backyard. What's up with Chavez referring to China as the "great Chinese fatherland" (italics mine)? [Note to CIA: Cue the puppet, boys.]

"We have been producing and exporting oil for more than 100 years," Mr. Chávez told Chinese businessmen in December. "But these have been 100 years of domination by the United States. Now we are free, and place this oil at the disposal of the great Chinese fatherland."

(quote from NY Times article)

While Bush is busy implementing the Carter doctrine, who's minding the Monroe doctrine?

P.S. Hope you're catching on to the fact that some of my writing is tongue in cheek ('Blame Canada', 'Infidels', 'our backyard'). The 'Moon over Parador' idea, that I'm serious about.

The Elephant has Left the Building.

The biggest oil fields produce an inordinate amount of our overall oil supply. (See one of Matthew Simmons presentations for a fuller look at this, sorry, no time to link right now, but it's in a prior post.)

Each of the biggies has it's own timeline, depending on how big it was to start, when it was discovered, how hard it's been pressed, what technologies have been used, etc, but when they start to decline, they have a big impact on the overall Hubbert's Peak curve.

Here's an article from Bloomberg about one biggie in Mexico, declining faster than expected.

Salient points:

- It was discovered roughly 30 years ago. Most of the big discoveries are old. We are unlikely to find many more that big and the last few years have been disappointing.

- Since 2000, they've been pumping in nitrogen to increase pressure and keep the oil flowing. These technologies can cause a temporary spike in production, then later sharpen the decline.

- Smaller fields they are bringing on line probably won't make up for the loss of output from this big field.

PS. The largest oil fields are sometimes referred to as 'elephants'.

Tuesday, March 01, 2005

Further justification for Operation Alberta Freedom.

Canadian Donald Coxe (actually, I have no idea if he's Canadian, but he works for a Canadian company and that's good enough for us..) joking on CNBC last week:

"I've been telling clients for two years that the first jobs we should have outsourced to Asia were Wall Street's oil price forecasters. They've been continually getting it wrong."

U.S. Special Forces landing outside Ft. McMurray now..

CNBC endorses Operation Alberta Freedom.

CNBC's Mark Haines has got a good sense of humor, he's suggesting we invade Canada over oil, perhaps dressing all our troops up as old people, put them on a bus and pretend they're going over to buy cheap drugs.

That may not be far off.

Anyway, guest host Robert Hormats, Goldman Sachs International, Vice Chairman gets it. He likes energy, called it the "revenge of the old economy", and suggested the story is: more stable, paying dividends, showing steady growth, with not enough capacity.

A value guy's oil.

Bob Marcin ran the MAS Value Fund for Morgan Stanley a while back. He's good.

He's suggesting COP, if you want an oil. Sounds good to me, look for a break to buy.

I want a new drug.

It's tough to keep on top of everything, but it's nice to see news supporting the general thesis.

ExxonMobil declares energy demand to rise for coal, natural gas, oil, with LNG big, and West Africa, Caspian Sea, Middle East and Russia playing increasing roles.

An article about Qatar signing big LNG deals. If the peak oil story is correct, and if it turns out to be around the corner, there are many who speculate we will move to natural gas as a transportation fuel. (Natural gas can be converted to a liquid though the process is not as efficient as straight oil out of the ground. Sasol, SSL, owns some of the patents on the process.)

An article on Gazprom, the Russian natural gas colussus. (Russia has a huge percentage of the world's known natural gas reserves, and it's now consolidating it in this one company.) Note that once Russian consolidates it's holdings so they own 50% plus 1 share (ie a majority), they will lift restrictions on trading Gazprom. Gazprom can be bought as an ADR, but it trades at a large premium that way. Again, natural gas may well be very important, and Putin is clearly on to this.

An article from Matt Simmons looking at oil supply and demand. I think it's an important read, so I'm not going to try to summarize it.

An article with a technical bent, looking at how various sectors are doing. I agree with the guy, energy is short term way overextended, but just by focusing on charts and what used to be, you don't see the big picture. I'm not just picking on this guy in specific, but too many people are unable to grasp that the financial, drug, tech thing is so 1995-1999. We are here in 2005 folks, and energy is the new drug. If you are only in those old things, if you are way overweight in those old things, or if you are only in an index, you are probably going to be left in the dust by the energy sector. (Jim Cramer gets this, listen to his radio show today.) The older Stovall gets it, he announced on CNBC this morning that energy was a place to be.

[A note on one line in the above article in particular - "Nonetheless, it definitely stirs memories of other speculatively driven rallies." - This is not the first comment I have seen that suggests the oil rally of Jan - Feb 2005 is something along the lines of the tech bubble of 1999. Yes and no. Yes, this is a quick move. But no, it is not comparable. Oil is moving from undervalued to fair value, depending on what you think oil prices will be this year. I think they will average over $40. But in 1999 tech stocks were doubling in months. We have had a 20% move in oil this year folks, not a 200-300% move.]

Here's a way to track how various sectors are doing, see "Hot Sectors" and "Hot Industries" towards the right hand side. Energy +7.53, and dominates industries for last 5 days. A clear and present buying panic, be careful out there.

[Please note, I'm not suggesting you buy energy now, but I suggest you think about following them and add some when they hit an air pocket.]