Disarray

Below are three triametrically opposed views. The first shows 'dumb' (misinformed) markets following supply signals (provided by the media). But we already know that NET supply is down a great deal in the Gulf, and will be for some time.

Second shows our Denial. Looking to the future, looking at our sources. There are good reasons why soil-sources - where oil is locked into rock shales - have not been pursued. It's expensive, it's complicated, it requires a lot of energy to get the finished energy product (including the expensive production of Hydrogen gas). More important, it's extremely toxic and degrading to the environment.

The third opinion is from an advisor to the Bush Adminsitration, and also the founder of the world's largest energy investment bank.

Yesterday I wrote that Campbell had pushed his estimate of Peak Oil out to 2010. My view is that although a specific date has some significance, it is also about as pointless as wanting to know the exact moment you 'get' the flu. You have the actual transmission, and then the infection. Does it matter when it happened, or what the symptoms are now? Using that analogy, it's obviopus that we're in advanced state of infection, and it's likely to get worse, and accelarate.

We are already witnessing all prices at the mercy of storms. This is not an aberration. We'll sse the same next year, and in 2007 ands beyond. When weather effects supply, you'd better believe it's a very thin line of thread holding our pockets together.

And we've seen that despite these supply disruptions, world supply has remained stuck. Global demand (driven by consumers like you and me) continues its seemingly unassailable ascent.

Like Simmons, I believe the emphasis is on Saudi oil. And it appears, from the evidence that we have, that there is no excess capacity there, and in fact, that capacity has peaked. Like Simmons, I believe this winter we'll see oil break out of its cocoon, and become what it is: a very precious, expensive resource.

Knowing all this, what should we do?
We should invest in alternative energy, principally nuclear, wind and solar (in in that order of priority).
Here's a quote from National Geographic: Without a big push from government, says one expert, we may be condemned to rely on dirty fuels as cleaner ones like oil and gas run out.

Oil Prices Fall More Than $1 a Barrel

NEW YORK, Oct. 19, 2005
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(AP) Oil prices dropped more than $1 Wednesday after the U.S. government reported crude and gasoline inventories rose sharply last week _ a sign that oil supplies in the Gulf of Mexico are recovering from hurricanes Katrina and Rita.

Since Aug. 26, a few days before Katrina struck the region, there has been a loss of 62.6 million barrels of oil, or 11.4 percent of the Gulf's annual production, and 316 billion cubic feet of gas, or 8.7 percent of annual production.


Oh, Canada's Oil Sands
By Robert Aronen
October 19, 2005

We've heard the story a thousand times: The world's oil is all located in politically unstable countries whose interests are opposed to those of the United States. Yet we have continued to increase imports for more than three decades, creating a dependence on foreign oil that is not easily broken.

Of course, we all know who has the oil. One country boasts the largest reserves on earth. Within the coming decades, its production will likely stand head and shoulders above every other nation's. Our unfavorable trade balance with this country could politically destabilize and humiliate the U.S. No, I am not talking about Saudi Arabia. Rather, I ask my countrymen: What are we going to do about Canada?

The hydrogen angle
As mentioned, bitumen is composed of carbon-rich, hydrogen-poor hydrocarbon chains. Upgrading bitumen to syncrude requires hydrogen from air-separation companies like Air Products & Chemicals (NYSE: APD) and BOC Group.

The risks
While oil sands production appears to be poised for future growth, investing in this area does carry some risks. Because oil sands require much higher production costs than conventional reserves, profits will fall fast for these folks if oil prices plummet. OPEC or Russia could increase production to lower oil prices and make investments in non-conventional oil sources unprofitable. Alternately, high prices could lead to a worldwide reduction in demand. Either scenario would need to be quite extreme to bring oil prices below $30 a barrel.

Environmental concerns pose a greater risk; producing oil sands requires more energy than conventional hydrocarbons. This has created some difficulties for the Canadian government, as they are signatories to the Kyoto Protocol. Increasing oil sands production has increased their carbon dioxide (CO2) emissions. For now, it appears that Canada has arranged its carbon credits to balance Kyoto and continued development, but investors in this area should pay attention to any revisions to current agreements.

Oil guru says crude could hit $190 this winter
‘Prices are really cheap today and they need to go a lot higher,’ analyst says

Updated: 3:41 p.m. ET Oct. 19, 2005
OTTAWA - Consumers should brace for crude oil and natural gas prices possibly doubling or tripling this winter, Matthew Simmons, a best-selling author and oil-supply bear, said on Wednesday.

"Prices are really cheap today and they need to go a lot higher, and they probably will go a lot higher," Simmons said in Ottawa.

"I am very concerned, given the destructive damage done by (Hurricanes) Katrina and Rita, that the United States must be closer to starting to see significant product shortages than we've seen since 1979."

"It's going to be painful for people to get used to actually paying real money for a really valuable resource," he said.