In 1956, Dr. Marion Hubbert accurately predicted that U.S. oil production would peak in the mid 1970s. In 1974, he went a step further and projected the world's oil production would peak in the last five years of the 20th century. The resulting peak oil debate, and questions over OPEC's oil reserves, have been raging ever since.

Let me tell you a little secret . . .

One of the most enjoyable moments of my day comes within an hour of waking up. But the joy isn't from the coffee that shakes off the grogginess from the night before.

Instead, it's when I look over the flood of messages I get from people who have absolutely no belief in peak oil. I'll get to why that excites me in just a second.

I'll give you a perfect example from this morning.

An individual (who I found out later today was not an Energy and Capital reader--no surprise there!) was opposed to peak oil theory. I'll save you the pain of all his inaccuracies, but the main idea he wrapped his criticism around was this: Do you really expect me to believe the world's oil reserves are going to dry up in the next ten years because of peak oil?

I simply wrote back "no."

You see, my enjoyment is that these individuals are convinced peak oil will never happen--without any notion whatsoever of what peak oil is!

But as usual, guilt washed over me once I arrived at work. It was from leaving this uninformed guy in the dark.

The Reality Behind Global Oil Reserves

His mistake was thinking that our world's oil supply will dry up because of peak oil. Even though the world has consumed roughly a trillion barrels of oil so far doesn't mean that it's going to run out. In fact, there's plenty of the crude still left in the ground.

Peak oil isn't about running out of oil, but rather running out of cheap oil. The world will reach a point when oil becomes too expensive to extract.

Consider U.S. oil production. Our production peaked more than thirty years ago, and hasn't been able to recover since. And this is including all the breakthrough technologies designed to enhance our oil recovery and reverse the production decline.

But predicting a global peak in oil production is much more difficult.

If access to oil field data were available, then I think we would already have an exact date for peak oil. Unfortunately, major players like Saudi Arabia refuse to disclose that information.

Also, the competition between oil producers has led to suspicious increases in oil reserves. Looking at the chart below you just want to scream one word . . .

Shenanigans!

Within seven years, all of these countries suddenly found massive amounts of oil to increase their reserve base. In Iraq's case, it jumped twice!

Yet without the individual field data, we're expected to just take their word for it.

We're Quickly Losing Our Cheap Oil

What's that you say? You want proof that oil isn't cheap anymore?

Let me ask you this . . .

How much did it cost you to fill up your car last week? The fact is that oil is hovering around $65 a barrel right now--more than doubling from just four years ago.

Not much to do but twiddle our thumbs, right?

Think again.

The "NOPEC" bill currently running through Congress makes us laugh even more than the misinformed opponents of peak oil. Essentially, politicians are hoping to strip the immunity that OPEC member states have from prosecution. Basically, they want to be able to sue OPEC.

Come on now, seriously?

Aside from the fact that it would only lead to an increase in crude oil and gasoline prices, I'd like to see how fast Congress would repeal it when they realize OPEC would just stop exporting oil to us.

But unlike the ridiculous Congressional "NOPEC" bill, we prefer to take advantage of peak oil.

One of the most important effects of peak oil will be surging energy prices. And this is where we step in. Next week, we're going to look at how you can make a ton of money from smaller, lesser-known energy companies. Here's a hint--those triple digit gains are to be found where you would least expect them!

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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