"$300 FOR A BARREL OF OIL! Are you insane?"

Believe me when I tell you that I hear this everywhere I go. The interesting part, however, is that twenty minutes later, the always hear the same thing, "Well, that makes sense, I guess."

The latest incident came yesterday. Normally, all I require from my bar is a shot of Jack and cold Natty Boh, so you can understand why I felt out of place last night after meeting some friends at a Martini bar. I knew I was in trouble the second the bartender wrinkled his nose in disgust when I ordered a shot and a beer.

In my defense, I didn't start the argument last night.

In fact, I wasn't even involved in the conversation at first. A group of people were discussing the situation with Iraq. The topic eventually led to oil prices, and, later, how to profit from the looming energy crisis.

One of the gentlemen started, "These (oil) prices will really get out of control once Turkey moves into Iraq. I mean, it's the only reason they're so high."

I couldn't let that one slide. I had a feeling that if any of you were there, you would have felt the same way.

Before he could elaborate any further, I quickly interjected, "So you're saying that a barrel of oil costs nearly $88 only because of Turkey going after some terrorists in Iraq?" As soon as he nodded, I started to laugh. Even though I knew the reaction he would have, I asked, "What are we going to do when it reaches $300?"

The look of shock on his face was priceless, and I knew what he was going to say before he bellowed, "$300 for a barrel of oil! Are you insane?"

I couldn't help smiling.

The Looming Energy Crisis

Naturally, any disruptive news coming out of the Middle East is going to cause oil prices to spike. But this is hardly an invasion into Iraq's sovereignty. The Turkish military isn't looking to burn oil fields or eliminate dictators. They're going after a group of rebels responsible for attacking Turkish security forces.

I wasn't surprised to see oil prices reaching $88 a barrel. When the incursion takes place, however, we'll see a slight correction. The oil rich fields in Iraq are far south of the targeted area. And although there are other factors to consider (pipelines, for example), production cuts are nothing new to Iraq's war torn landscape.

If the news that Turkey is going after terrorists in Northern Iraq (with the permission of the Iraqi government, too) is enough to push oil prices this far, imagine what would happen if the U.S moved into Iran?

But geopolitical turmoil, my friends, is only icing on the peak oil cake. It can make prices jump in a heartbeat, but not over a long period of time. And the truth is that higher oil prices have plagued us for months.

There's a number we should all write down and carry in our wallets: 98 million. That's how many barrels of oil we'll need to produce every day in 2015. And if the market is this tight when we're only consuming 86 million barrels per day, I'm scared to think where we'll be in eight years. Energy crisis wakeup call, anyone?

Last week, a lot of readers were asking where I think oil prices are going. The reason prices will continue to climb higher is because of demand. I don't see India or China slowing down in the future. If we consider how tight the oil market is today, oil prices will keep increasing, especially when we're consuming 88 million barrels a day in 2008.

We will see $100 oil by next summer, perhaps sooner if we add the geopolitical factor. I just mentioned the possibility of the U.S. attacking Iran. If that happened, oil prices to explode, reaching up to $300 a barrel almost overnight.

Energy Crisis=The Investment of a Lifetime

Once you accept the fact that we're headed for higher oil prices, you need to ask yourself: Will I sit on the side and watch, or make a fortune off it?

But whether you believe that prices will rise from peak oil, weather or geopolitical crisis, we know that there will be trillions of dollars up for grabs. By 2030, the world will have spent roughly $21 trillion just to meet the growing demand for oil and gas. This money will be spent on maintaining our oil infrastructure.

So, what do we do to profit from the energy crisis?

For starters, I'd look into smaller exploration and development companies that can give my portfolio more bang for its buck. Stay tuned, because in the next few weeks, I'll show where you can go to profit from these enormous energy investments.

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.

Follow the money trail. Sign up for Energy and Capital now.

Enter Your E-mail Address Below:

By signing up, you'll also get our latest report, The Truth About Oil.

oil real price is $300-$500 per berrel

It is a true blessing when an obvious provokctive article makes subscribers react. Hey, hang on, what should really stir the readers?

Reality is that the supply side is uncertain, while demand is increasing. So would we be dramatically hurt financially by oil increasing to say $ 200 by October 2008? And $ 300 a year later?

Not really. New energy sources may be developed faster which is in the interest of most countries in the western world. So, investment of another $ 200 Billion to $ 300 Billion over 5 to 7 years would really push the economy in top gear. Even in Ohio.

Adjustment will take place as in the 1970'ies when the new deal structure between almost illiterate Arabs and Big Oil made prices increase by 300% plus. The amount of oil in oil tankers "stored" in Norwegian fjords at the time were unbeliable.

US cars would be even less attractive and another redirection of production will take place. Maybe the Detroit genius finally would understand the writing on the wall.

Peak Oil is probably imminent. But the market hasn't caught on, as oil futures are still in some backwardation. Peak Oil awareness will probably be obfuscated somehow in the near term, such as with terrorism or war. This is because the shudder and shockwave of full awareness would be utterly incomprehensible. Longer term, there is unfortunately a "Plan B": Severe de-population, such as by plague or WWIII.

Dear Keith Kohl:

When and if oil reaches the $300- per-barrel price level it will then be worthless; it will have reached the classic economic status of the "Giffen Good." Reason? As the price goes off the scale of the Indifference Curve, oil will become increasingly plentiful; but concurrently, the high price will have motivated the development of alternative fuels which will supplant oil as a viable energy source. What this augurs in the long-run is that oil will be worthless except for its original lubricant role, an outcome good for the Earth and its human dwellers, due especially to the adverse impact of oil on the environment and Global Warming.

Regards,

Bob Hougland

I agree that peak oil is near and that if current trends continue oil would get increasingly tight and expensive. But, that overlooks the adjustments that would take place if oil prices climb substantially from here.

On the supply side, numerous sources ranging from solar, wind and coal would become extremely lucrative, causing massive investment flows.

On the demand side, there is substantial potential for conservation, ranging from public transport to hybrids. Migration to hybrids alone could reduce transport energy use by 50%. Around the house, the thermostat offers opportunity. I keep my thermostat at 55 degrees in winter with minimal effect on comfort. Not many will do that with todays prices, but most would do so well below the prices you suggest. And technology is available and viable to reduce energy use at home and in industry by 50%. All this is just waiting for the incentive to be implemented. And if all else fails, the economy will enforce the reductions with a recession. Take a look back at the 70's for an example of what could happen to demand.

Energy Guru

I think $120 but the trend is up for now. At $160 people would just stop using it so freely so the price is self-limiting. I remember the 70's. Can it get to $300 eventually. Of course, it's called inflation. In 1982 dollars, we still haven't surpassed the old high yet. Is that a true boom in the price or just inflation at work. It seems just like typical inflation as the dollar keeps going down.

great theory -- BUT-- you are forgetting the world is heading for a financial crash [unless you think whats happening is temporary] And then oil will plunge along with everything else

I have no doubt that patrons of this web article publication have and will make profits off the oil and energy crisis. However, I take exception to the tone and the misguided logic of this particular article by Keith Kohl. A moment's reflection will tell any reasoned and resource-knowledgeable person that we will never produce oil above the present peak, and therefore talk of 98 million barrel per day supplies are more than wishful thinking, it's a lie. Maybe you just wish to prolong the wishful, optimisitic thinking as long as possible, but with that last, throwaway line about investing in "smaller exploration and development companies" you give yourself away as a schister. There is patently no way such small companies can fill this enormous supply gap, and to pretend that they will, even if they make some easy money for you and your investors, is a peak of dishonesty and/or delusion. Tell the truth and apologise.

I have little doubt that peak oil is for real, that supply will tighten further and that prices will continue to rise. I have positioned myself accordingly and invested in the oil service sector, alternative energy sector etc, which so far has been a good strategy. However, my biggest concern is that as oil prices continue rising, the world will sooner or later find itself in a depression where everything will collaspe in value, including my energy portfolio.
Any thoughts on this?

Get your facts straight Keith!! I'm IN Kurdistan right now and have been for the last 2 years. If the Turks cross over, the people in Kurkuk (180 Kms SE) are scared to death that they/Turkey will go there to "claim their own" (HUGE oil reserves) The Iraqi Gov HAVE NOT given Turkey their blessing to come over in pursuit of the PKK. STOP listening to the MEDIA!!

Keith,

I find the thought of $300 oil very inticing since I am in the oilfield equipment manufacturing buisness. But reality sets in, oil fundamentaly cannot reach this point. Write this one down, $155-$170 is the highest it can get and our economy still have some type of life. Maybe not even that high. It is ok to dream though. Keep up the good work!

Sincerely,

Joe Goodeyon
Wellhead Systems Inc.

Pardon my philosophical bent, but isn't looking for small companies to pump the last barrel of a non-renewable resource that when burned pollutes our nest, a little like the crew of the Titanic manning oars and rowing like crazy...AFTER hitting the iceberg?
My money's on the Sun.
Cheers.

Enjoyed Keith's article this a.m., and, indeed, all your coverage on energy. Could someone do an article on why energy service companies such as SII, NOV and ATW seem to drop when per barrel oil prices rise?

Why stop at $300? $1000, $2000 hey, why not $1 million? If it's one thing I can't stand, it's a doomsday sayer.