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'Sky's the Limit' for Crude, says Peak Oil Advocate: Buy Drillers, Avoid Majors
Posted Jul 28, 2008 10:59am EDT by Aaron Task in Investing, CommoditiesBuying drillers like Transocean and Diamond Offshore is the best way to "Profit from the Peak," says Chris Nelder, co-author of a book of the same name, who recommends avoiding major integrated oil companies like Exxon.
The "peak" in question being, of course, peak oil. Based on the work of geologist M. King Hubbert, "peak oil" adherents like Nelder subscribe to the concept that global oil production is hitting a plateau and will soon decline sharply. With supply unable to keep up with demand, Nelder believes oil prices are thus primed to move in inexorably higher.
"The sky's the limit [for crude prices] if demand keeps up," says Nelder, an editor at EnergyandCapital.com. However, he believes rising oil prices will severely crimp global economic growth: the only question being from what level -- $200? $300?
But what about the following:
- Saudi Arabia's pledge to increase production to at least 11 million barrels/day.
- Last week's U.S. Geological survey showing massive reserves in the Arctic Circle.
- Major new finds off the coast of Brazil and in the Gulf of Mexico.
- Heightened possibility of drilling in the U.S. continental shelf and in Alaska.
As someone who objects to the idea that peak oil is a theory vs. fact, it's not surprising Nelder is rather dismissive of the idea the world is "awash in oil," as many oil bears claim.
Those finds won't come on line for another 10 years at the earliest and, regardless, will be "just a bump on the oil production curve" and "can't replace the depletion" of today's big fields under production.
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