Post-Peak Oil Trends

Written By Nick Hodge

Posted December 23, 2010

It’s a great time to be an Energy & Capital reader.

It’s an even better time if you’ve been following our advice over the past five years.

Since 2006, we’ve been bringing you practical investment analysis for the new energy economy.

From the very first issue, our view has been that the world is running out of cheap, easily accessible oil — and that fortunes will be made trying to replace it.

A taboo topic in the days of $30 oil, some people dismissed us as crazy. Others called us ‘Peak Freaks’ on national television.

But we’ve been vindicated — our readers, enriched — by the decline of big oil fields, the rise of cleantech, the new importance of unconventional oil, and the arrival of $150 crude.

The International Energy Agency (IEA) even recognized Peak Oil for the first time in its World Energy Outlook this year. And it referred to it in the past tense, saying output will never again get to the “all-time peak of 70 mb/d reached in 2006.”

We called Peak Oil five years before the self-described “intergovernmental organization which acts as energy policy advisor to 28 member countries in their effort to ensure reliable, affordable and clean energy for their citizens.”

Here are three more major investment themes the majority is still ignoring.

Water scarcity

We still won’t admit that Las Vegas shouldn’t exist. Yet its population continues to climb while 90% of its water comes from the Colorado River.

According to the Bureau of Reclamation, “The Upper Colorado River Basin is experiencing a protracted multi-year drought which began in October 1999.” In October, Lake Meade — which is fed by the Colorado — fell to its lowest level in 75 years.

Problems like this are commonplace all over the globe…

A billion people still lack access to safe drinking water; 2.5 billion lack access to water for sanitation and waste disposal. Drought and climate change are leading to the drying up of fertile land around the globe.

But like the end of cheap oil, there is huge profit potential in this situation.

When asked at a recent agriculture investment conference in Geneva whether it is possible to make money from water, Judson Hill of NGP Global Adaption Partners was clear: “Buckets… Buckets of money.”

Hill added, “The water business is very much like the energy business was 20 or 25 years ago. As the price of water increases we are all going to become better stewards, not because we all become environmentalists but because it will affect our pocketbooks.”

A renewed focus on water distribution and agricultural irrigation is imminent. Companies that manage water or help customers use less will be highly sought.

Top picks: Lindsay Corp. (NYSE: LNN) and Layne Christensen (NASDAQ: LAYN).

Efficiency first

The entire world put its renewable cart before the efficiency horse.

We’ve spent billions building out solar and wind capacity, designing new modules and blades, and figuring out how to expand their use.

It’s slowly becoming apparent that we should’ve focused on reducing demand before increasing supply.

What’s more, clean energy doesn’t save money — yet.

As a homeowner, I’d rather spend money on efficiency to reduce my power bill than on a solar system to feel better about where that power is coming from…

Major companies and banks are starting to feel the same way.

The past few months have seen an uptick in both venture capital spending and mergers and acquisitions in the efficiency sector, laying the groundwork for a profitable year ahead.

From programmable thermostats to solid state lighting and software-controlled HVAC systems, companies in the efficiency space will be a great portfolio addition in years ahead.

Top picks: Echelon Corp. (NASDAQ: ELON), Veeco Instruments (NASDAQ: VECO).  World Population 2010


World population right now: 6.89 billion people.

World population in 2040: 8.8 billion people.

It took us 120 years (from 1800 to 1920) to get from one to two billion people. We’ve added almost five billion in the past 90 years.

And we’ll add two billion more in the next thirty.

Hand-in-hand with energy and water shortages will come a struggle to feed a growing world. The market is already responding, and there are numerous ways to play it.

One of the most essential needs to produce more food is more fertilizer.

Several analysts, myself included, think companies like Agrium (NYSE: AGU), Mosaic (NYSE: MOS), and Potash (NSYE: POT) will be great investments for years to come.

Increasing needs for grain mean increasing demand for fertilizer. So cheap natural gas prices — 80% of the cost of manufacturing nitrogen fertilizer — mean falling costs and rising profits.

You can also invest in exchange traded funds (ETFs) that hold a handful of related stocks.

The Market Vectors Agribusiness (NYSE: MOO) holds companies like Deere (NYSE: DE), Archer Daniels Midland (NYSE: ADM), and Syngenta (NYSE: SYT), while the PowerShares DB Agriculture (NYSE: DBA) holds commodities like coffee, live cattle, and sugar.

After the most recent USDA report showed continued tight supplies of corn, cotton and soybeans, this sector is already rising in anticipation of boom times ahead.

Agriculture Stocks

Like Peak Oil in early 2006, these ideas are still off the radar of most investors.

And again, Energy & Capital and its related publications will continue to bring you the best investment analysis and picks in this new and constantly changing energy economy.

Call it like you see it,

Nick Hodge

Editor, Energy and Capital

P.S. The Peak Oil profits are still rolling in.  In fact, Brian has just found a new type of drilling company that promises to double U.S. production… And it’s already being used by major oil companies all across North America. You can learn all about the technology and the company behind it in our pioneering “petro-fracking” documentary.

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