Let me explain...

Colonel Edwin Drake is popularly credited as founding the American petroleum industry. But this is not the case.

It's true that Drake drill the first oil well near Titusville, PA back in 1859. But it was Samuel Kier, inventor and businessman, who is really the grandfather of the American oil industry.

Kier — a Scotch-Irish immigrant — owned several salt wells around Livermore and nearby Saltsburg, PA. Kier also held interests in several coal mines, a brickyard, and a pottery factory but it was his salt business that really put food on the table.

In the early 1800s, Kier's salt business was booming. But by the 1840s, after years of mining, a crisis was looming as Kier's salt wells were becoming fouled with petroleum.

At first, Kier simply dumped the then useless oil into a nearby Canal. But after an oil slick caught fire, he was forced to stop. He then decided to look for some way to profit from this otherwise worthless byproduct.

With no formal training in science or chemistry, he began experimenting with several distillates of the crude oil. And in 1848 Kier developed a substance called Rock Oil (a "snake oil" type tonic whose key ingredient was the petroleum from his salt wells) and began selling the liquid as a ‘cure for everything' making him the first person to market petroleum.

Now the really interesting part to this story is this... In an 1855 advertisement for the Rock Oil, Kier prophetically urged customers to buy soon before "this wonderful product is depleted from Nature's laboratory."

Unbeknownst to Kier, these words would be echoed throughout history seemingly as the first hydrocarbon depletion warning.

Kier did not know the full scope of his words. At the time, his message was nothing more than an advertising ploy. Nonetheless, over 150 years later we hear similar forecasts today from the world's leading petroleum geologists.

Now, as we've talked about many times before, we're not exactly running out of oil. What we are running out of is cheap oil.

The world's insatiable demand for oil will inevitability overtake our ability to produce it cheaply. Once this occurs - and it's already started - oil prices will skyrocket to unprecedented levels.

And despite the resurrection of Prudhoe Bay... the recent Gulf of Mexico discovery... Saudi Aramco's new 1.2 MMbbl/d oil field... and everything else that's push oil prices down 25% since early August, the oil bull market that will propel prices into the stratosphere is still right on track.

In fact, if anything the recent correction just offers investors another opportunity to buy in at radically low levels. And like Kier, we can use the peak oil crisis to our advantage by investing in the sector now.

But how do we know there really is a crisis and that peak oil isn't just another Y2K?

Well, one of the most compelling pieces of evidence to support peak oil that I've found throughout my years of study is the peak in oil field discoveries.

Peak Oil is Really a Two-Headed Snake

There's no denying that global oil production has been increasing for over 140 years. In fact, the world has managed to more than double its oil production since 1965 alone.

But regardless of this considerable boost in production over the past 40 years, you can bet the farm that the world will not be able to keep up this kind of increase for much longer.

You see, the thing is this... You have to find oil way before you can produce it.

But new discoveries of major oil fields peaked over 40 years ago and has followed a steady decline ever since. In fact, the last major oil field discovery — Cantarell in Mexico — occurred 30 years ago. (The newest Gulf of Mexico field, by the way, is just a mid-sized field)

"Technology is great, but it can't find what's not there. In the last five years, we consumed 27 billion barrels of oil a year, but the oil industry discovered only three billion barrels a year. So only one barrel was replaced for every nine we used."

- L.B. Magoon, U.S. Geological Survey

Since then we've been unable to find any new field that is able to produce more than 1 million barrels per day. And logic dictates that without new major discoveries, we're simply unable to significantly ramp up production.

That means the peak in global oil production is soon to follow. So, peak oil is really a result of peak discovery. The model looks something like this:

So why not just go out and discover more elephant-sized fields?

Well, that would work like a peach. But the fact is there are no simply more major oil fields to be found.

Believe me, if there were any more giant oil fields left to be discovered, the major oil and gas companies — who've already spent trillions collectively on exploration — would have found them by now.

Given geologists' sophisticated understanding of the characteristics that would indicate a major oil find, it is highly unlikely that any area large enough to be significant has eluded attention and no amount or kind of technology will alter that.

- Alex Kuhlman, author of Peak Oil Survival Guide

The bottom line is that are very few, if any at all, significant discoveries remaining to be made. And as a result of the lack of new discoveries, I believe the peak in global oil production will occur soon if it hasn't already

And as investors we need to strike while the energy iron is still hot.

"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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