Waking up at five o'clock in the morning is easy for some people. Unfortunately, I'm not in that group. In fact, I can't think of anything more I loathe than waking up at the crack of dawn.

Yet my routine is always the same, day in and day out, and the worst part of my morning is the drive to work. Slugging through traffic on I-95 during rush hour is an experience I hope you never have. Trust me, sitting in traffic that is congested for miles in both directions will give you a frightening insight into our future oil demand.

Luckily in my case, however, the worst part of the day is followed by the best, and I have you to thank for it.

By the time I reach my desk in the morning, my email inbox is flooded. I know it's impossible to answer every single comment, but today I'd like to take the time and focus on a few of your concerns.

There have been a multitude of people saying that $300 for a barrel of oil is nothing more than wishful thinking. What I'm saying is that most people don't realize how cheap oil is right now.

Think about this for a moment: A cup of oil only costs roughly thirteen cents. And to think a pint of Guinness costs me almost ten bucks!

I don't see any other direction for oil prices than up. One of the interesting things I noticed about all the feedback from my readers over the past few months is that nobody suggested oil prices would fall in the long term. Even with a slight correction during the winter, people will be waking up to reality of peak oil.

The peaking of global oil production is right around the corner. A lot of my new readers have been asking, "What exactly is peak oil?"

In order to give someone a thorough understanding (not only what peak oil is, but also what it means for us) would take a few days, so stay tuned next week when we catch up on the peak oil debate.

Like it or not, the oil markets are going to get much tighter over the next few years, and as investors it's hard to just sit around and watch some of these companies making some huge gains.

When I mentioned earlier this week that the energy crisis is the investment opportunity of a lifetime, I meant it. I didn't want to suggest those smaller companies would save us from our burgeoning demand, but some of those plays could carry your portfolio a long way.

But you can't just close your eyes and randomly pick the first company you see. Instead, you need to closely evaluate the company to see if it's the right one. You may not be in school anymore, but doing your homework will mean the difference between busting or going to the bank.

Another reader was concerned about certain service companies. Whenever oil prices rise, these service companies should shine. But again, just because a company is in a specific sector is doing well doesn't necessarily guarantee its success. In order to meet our future energy demand, over $20 trillion dollars will be needed to be spent on the oil and gas infrastructure.

It would be wonderful to think that the world would kick its oil addiction tomorrow, or that everyone would suddenly decide they'll be walking to work from now on to save gas, but I'm not that optimistic.

Renewable Energy: Will it save us from our oil demand?

One of the most frequent questions I'm asked by you is how our future energy demand will be satisfied.

My answer is always the same, "It all depends on scale."

Personally, I don't see renewables supplying the world's energy on such a massive scale without a serious amount of investment dollars. Granted, things might be different in two decades, but renewables simply cannot provide us enough energy on a global scale.

"What's next?" you ask.

When oil is out of the picture, I think the world will be turning to nuclear energy for help. Nuclear energy have the potential to fuel our soaring energy demand. Yet just like renewable sources, nuclear energy still has many obstacles to overcome, mostly dealing with waste. The U.S. currently generates roughly 20% of its electricity from nuclear energy.

As oil continues to break new record prices, we're going to see a tremendous amount of interest in nuclear technology. It's only a matter time.

Until next time,

Keith Kohl

"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

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I don't know where you get your Guinness,but i can get all i want for $3/pint.

Frankly Sir, I think you're full of shit!! The people have the power on this. And once they realize this (like before - 1974, and 1979), the people will use less gasoline by carpooling, less use of high mileage vehicles, ect., and the price of oil will fall back to $45 - $55 in the next year or so. Want to make a personal bet on this sir?

Keith, you can read charts. Get a copy of the IPCC ice core data charts- a good example is in the book version of Gore's movie "An Inconvenient Truth" - which show temp dev from mean along with CO2 concentrations. What is revealed about ice age cycles, weather cycles, spikes, and trigger point?

I hear nothing but doom and gloom from this site, but I think you are being a bit short sighted and are being led by those who want us to believe the end is near. First of all, I spoke with one of the few people in the world who has a natural ability to read drill cores to determine where oil is present. She told me that the entire west coast of the US and Canada has tremendous oil reserves except for one small strip. If the oil companies were to drill almost anywhere along the coast (on land as well as off the coast) there would be plenty of oil available... we could stop buying from the Middle East and elsewhere, the reserves are that big. Of course this would lower the price and that would not be politically popular. Another point which you fail to address is the abiotic origin of oil which has been pretty well been substantiated. Fields which were supposed to have run out years ago are still pumping, perhaps not as plentifully as before, but it takes time for the carbon material from below to seep back up... but it does. Another point which seems to be ignored is the ingenuity of people and the advances of technology. Yes, if the state of our usage remained the same, the demand could go up astronomically. But with the development and acceptance of such things as LED lighting, new more efficient electrical devices such as the new servers and computers which run substantially more efficiently than the previous generation, the growth of nuclear power, and other technological breakthroughs, many of which are being incorporated up front by developing nations as well as being adopted for cost purposes here in the developed world, the demand for oil will slow down rather than speed up. In the early 20th Century there was talk of overpopulation bringing about massive starvation which never happened due to advances in farming technology. We will get around the oil issue in a similar way and there is no reason to cry "the sky is falling". What needs to be done will be done. Eventually the truth will come out about the availability of oil and, with the manipulated price increases, reductions in demand will occur.

>>
And to think a pint of Guinness costs me almost ten bucks!
>>

You pay too much for your beer!

Keith,

Great article -- what I'd REALLY like to know is what specific ETFs or other vehicles are ideally suited for profiting from long-term oil price increases. Oil futures? "XLE" and "OIH"? Something different? This is the real question that investors have to answer, NOW! (;-)

Dear Keith
I enjoyed your article and am betting my shirt on continued rises. I also agree nuclear fission is expanding and will continue to do so.
For the real deal in future the nearest prospect to a high tech silver bullet is nuclear fusion. I suggest you Google ITER and DEMO.

It is reckoned that there are about 500 man hours of energy/work equivalent in a gallon of petrol.
(To give an example, put a gallon of petrol in your car and see how far you can go; 20-50 miles depending on your car. Say the engine is 50% efficient, so double the distance. How long will it take you to push the car 40-100 miles? If you don't die from the effort, around 500 hours)

So, given that a man in the US is paid at least $10 an hour, the cost of a gallon of work/petrol equivalent is 500 hours multiplied by $10.

Anyone ready to pay $5000 for a gallon of petrol?

Keith,

When will we begin to realize sufficient oil from shale in Colo., Utah and Wyoming? It seems that if production ramps up soon enough that 1.2T barrels will put off peak oil a few decades. This won't solve the CO2 problem, but should buy enough time to develop methods of generating, storing and distribution of hydrogen. Hydrogen is probably the future of automotive energy and development of renewable sources are likely to relieve demands for coal and natural gas for stationary applications. DB - Detroit

Hi from Italy. U guys are doing a great job. There's another factor in the energy issue that u never consider: energy efficiency. The most sustainable energy source is the energy saving.

You are absolutely wrong, Keith Kohl. $20 trillion for oil infrastructure? I'll bet next email, you'll be saying that this will be the cost for a barrel of oil in the next 5 years.

With 20-25% of the world coal it will play a big part in the future as will Methane Hydrate and I think Oil Shale. Clean coal is around the corner and the CO2 captrure will have a market in CO2 flooding. I'm supprised that more plants for crude from coal are not in design and construction already.
Like your articles. Better than most.

You sound to me like the big oil companies are pulling your strings.
I suggest that there is enough oil in the alberta tar sands to supply world demands at the current levels for the next three hundred years. This does not include the conventional oils theat are yet to be discovered or that there is a move to non oil energy.
The prices are high only because of the gouging by oil companies
You should find another bar if you are paying $10.00 for a pint of Guinness. You are being gouged by the bar.

Sorry, but close observors of the nuke industry say that fuel supplies will severely limit growth of nuclear power generation. Lots of uranium in the earth's crust, but not much in minable concentrations.

Try conservation and efficiency. Cheap and effective, and likely the most viable solution

Good article but I would like to point out that as long as oil price stays high (above $25.00 per barrel) it is very likely in my estimation that the era of oil barrens and oil rich countries will come to an end. My reasoning is that our renewable and alternative sources of energy will have a chance to prosper and as the country and ultimately the world becomes more self sufficient with these sources the oil barrens and oil rich countries will no longer have the leverage to without justification continue this esculation of the oil barrel prise. Just a matter of time and they will prise themselves out of the world energy picture and states like California and countries like brazil have quicklyy moved to isolate themselves from Big Oil and the Oil Speculators.

Your opinions on gas are important. However, there are alternatives such as Biomass heating systems. I've owned a heating system for 6 years now and have saved thousands on my heating and electric bill. Transfering this savings over to buy gas for my transportation is a breeze. Evewn if the gas at the pump goes to $10.00 a gallon, I'm still saving. If every American home alone uses this technology we can save enough energy to run our cars for the next 50 years (not my words but the Energy scientists and minute calculations). So why, haven't you mentioned about Biomass? Is is because you're ignorant of the benefits, ot just needing more information? Using solar, hydro, wind and biomass combined can indeed save us. Remember it all started here; we have the technology, we have the resources, and if we have the determination, we can prevail.
Thanks

I think you're absolutely right about imminent peak oil, and the crisis it will cause.

My sweepstake ticket for USD 100/bbl is November 29. What is yours?

BUT -- there are some new software technologies out here for the development of old and wrongly abandoned fields, using 2D and 3D seismic boosted by expert systems.

We're just getting to grips with one such system -- so the web site isn't up yet.

But in the fullness of time, could an article on this technology be of interest?

Kind regards

Scott

First off, I wonder where you buy your Guinness. I buy my ale at about $3.0-3.5 at the local watering hole. But otherwise I agree with your atticle. I am a nuclear engineer, and have been through all of this before. The problem with nuclear waste is partly political. The US chose not to recycle waste, even though at least one plant was built to do that. Recycling is done in France, and although it does not eliminate waste, it greatly minimizes it, and it also allows much more energy to be extracted from the original uranium. Sticking it in the ground is like sticking your head in the sand to ignore the problem.

Appreciate your commentary and find little fault in reasoning, but have aquestion. Might not a global recession slow or even temporarily reverse the demand imbalance buying time for new finds and transitional energies to make up some ot all of the longer term imbalance? Said differently, just as trees can't grow to the sky, Oil cant rise forever without consequences!

Keith, re your comment:

"When oil is out of the picture, I think the world will be turning to nuclear energy for help. Nuclear energy have the potential to fuel our soaring energy demand. Yet just like renewable sources, nuclear energy still has many obstacles to overcome, mostly dealing with waste. The U.S. currently generates roughly 20% of its electricity from nuclear energy."

It is important to understand the different roles played by nuclear energy and chemical energy in the global economy.

Nuclear energy is currently convertible to electricity. The economics and investment opportunities of nuclear electricity depend largely on government subsidies. The liabilities are such that green investors and others are not going there. In droves. Examples of the liabilities are accidents, terrorism, failed waste disposal strategies and nuclear proliferation, all associated with the industry.

Look up the [US]Price-Anderson Act, for an example of how nuclear electricity is supported by the US government. The industry is not liable for contamination by nuclear accidents.

Look up proliferation. By offering reactors to India, the US Government is currently violating the NPT, an international treaty which is the US Law of the Land, under international law. As a result, it is arguable that other nations are going to feel justified in further undermining this significant treaty, which stands between ordinary people and nuclear war.

Finally, look at the fact that wind power and solar voltaics are spreading at a phenomenal rate of growth. Nuclear electricity can be used to convert water to hydrogen, to be used as fuel, but so can any safer, cheaper source of electricity. I recommend you
read
www.rollingstone.com/politics/story/15051506/global_warming_a_real_solution/1

Rolling Stone, June 2007

“The Transition From Oil"

Which describes a much safer and more sustainable path to a viable energy future"

"“What would happen if we [the USA population] created a truly free market, one in which alternative energy could compete on an equal footing with oil and coal? In 2004, physicist Amory Lovins answered that question. In a study co-funded by the Defense Department, Lovins and his colleagues at the Rocky Mountain Institute detailed how the United States can completely wean itself off all oil — and create a much stronger economy — by 2050.
"

Best wishes,
Robert