Investing in Oil

It may be either wise or unwise to invest in oil, depending on which side of the tennis court you are playing on.

Oil will top off very soon, and the effect will hit markets within seasons. Once it breaks, it won't be gone for years. This could be two kinds of good opportunity, or it could be disastrous. Some facts offer relief. We will switch our primary automotive and engine fuel from oil to another or likely several fuels within the next *3 years*. Very few new cars in business year 2010 will run purely on gasoline, or if they do they will need to get MPG in the 50-60 range and be rather inexpensive. Profit will no longer flow to petroleum engines, that much can be said.

However, for a year or two, it definately will. We are so drenched in oil as an economy that we can scarcely do without it, and will be forced to pay out the nose for whatever the market demands of it, especially after supply cannot meet demand. We could see oil prices hitting $140 within a year assuming unobstructed markets. That is a 100% appreciation. That is good money.

But what does the money mean? Investing in oil is sacrificing a considerable amount of investment in other areas, and we seem to need every bit of investment potential going into oil alternatives. Oil is a trillion dollar business, and changing our world's infrastructure away from it will take plenty of money and labor. What will it matter if getting that money causes the American and world economy to tank?

You could invest in oil and make a killing over an 18 month period, only to see those profits eaten by inflation due to an economy forcibly shifted into low gear. They will eat you too. Where will you put the money once you've made those billions on the stock market or in the oil industry? What sector will not be harmed by peak oil where you could hedge your funds? It is pointless to go all-in to oil and let the rest of the world work itself out. You can't eat oil.

Long term investors will either avoid oil investment or invest lightly in oil among all sectors and focus investments into alternative energy, major R&D firms, fuel cell research, battery research and metal hydrides, and possibly into gold. Some of the more progressive automakers may be fiscally responsible choices.

Unfortunately, energy conservation will not reduce our oil consumption significantly. It only secondarily decreases the amount of oil used in power generation, agriculture, and industry a small amount. Probably less than 500KBD. It might be wiser [at any time] to buy and eat organic foods and have a garden, and to reduce unnecessary travel and convert your vehicle to make use of nonpetrol fuels. Home oil heat uses a substantial amount of oil, and switching your home from oil to other forms of heating, or augmenting heat sources with a woodstove or better insulation can reduce oil consumption in meaningful ways.

Higher oil prices mean all products cost more, since very little is made locally in any given part of the country or modern world. We can foster these local industries [with local jobs] now by doing business with them and investing in them, and doing less business with major multinational companies reliant on shipping [especially international shipping] and distant fiscal and command centers. These items will become 'luxury'. Make sure they're worth it if you use them.

I would also invest or do business with companies in nations and world regions that are preparing most readily for this energy shift and expect to be hit lightest by peak oil. Nations that have publicly addressed the concept of peak oil, particularly with their media and citizenship, are likely to be more economically prepared for peak oil and its aftermath.