Baltimore, MD-- Energy prices have soared over the past week, due in most part to a powerful cyclone that hit Oman, shutting down a terminal shipping 650,000 barrels of oil per day. But once the storms stop, however, peak oil will ensure those prices remain at record setting levels.

It's difficult to sit here and write about the latest news on oil when there's so much money being made. It's like trying to be still as waves of electricity shoot through your body. Yes, it's that exciting!

You see, we've had our eyes on several energy companies lately. And for past few weeks, Pure Energy readers have been raking in the dough with their latest oil plays.

I'm talking about 12% and 14% gains in just days!

I know a multitude of my Energy and Capital readers are also in that mix. So go ahead and pat yourselves on the back, you've earned it.

But here's the thing . . .

They don't appear to be slowing down!

So what's behind the profits they're making?

Well, that's easy. The answer is peak oil.

One of the most telling signs that we're experiencing the effects of peak oil is the unprecedented price oil is reaching. If I were writing just a few months ago, I'd mention how OPEC was comfortable with a barrel of oil trading at $50. But now they're saying they're happy with oil between $60 and $65 a barrel.

But high prices are good for exploration, aren't they?

That has usually been the case, at least. My older readers will remember the trouble we were in during 1981. Surely you remember the massive lines to fill up your tank. Oil prices reached record levels, which prompted companies like ExxonMobil to spent almost $40 billion on new exploration programs.

Over the next few years, prices plummeted and all was well again for the average driver.

I remember driving to college for the first time. The Hess station right next to my apartment sold gas for under $0.95 a gallon.

But we all know that the last five years have seen one jump after another, culminating in $78-a-barrel highs last July. Ten months later, oil is already trading around $66 a barrel.

Seems like a good time for companies like ExxonMobil to break out their exploration boots again, right?

Unfortunately, that wasn't the case in 2006. ExxonMobil spent roughly half the amount for (among other things) exploration compared to 1981. I can only guess that they've realized how expensive it's gotten to find more oil.

Or take BP, for example. They know the cost of oil all too well. At Prudhoe Bay, the company has been fighting tooth and nail to keep production flowing. The field is almost three decades old. And don't forget that BP originally gave Prudhoe a 25-year production life. As one of my colleagues put it, "They're living on borrowed time."

Prolonging oil production at the Alaskan oilfield has been costly. The company is forced to spend billions of dollars on maintenance. Last month they discovered a leak in their pipeline. The temporary shutdown cut production by 100,000 barrels per day. That's about a quarter of their production at Prudhoe Bay.

It's only a matter of time before the giant oil field is exhausted. If you let Prudhoe Bay stand for any of the major oil fields in the world, you'll have a picture of where the global oil situation is headed.

Supply and Demand

According to the EIA, global oil production is expected to reach approximately 87 million barrels per day by the end of 2007.

But we know that the world is struggling to maintain its current production levels. Increasing global oil production by that much may prove to be too difficult, especially with many large oil fields entering into depletion.

This year will be the test for peak oil theory.

Personally, I feel that the EIA won't be able to ignore the signs of peak oil after 2007. But instead of just watching peak oil grip our world, we can still make a killing off it. And right now there are several ways to invest in energy prices. For some, like the Pure Energy readers, the money is already rolling in.

Until next time,

Keith Kohl