Peak Fossil Energy

Tom Konrad CFA The best four stocks I've found in my six month quest to find the best peak oil investments. I apologize for being a tease.  Since March, I've been writing this series I've called "The Best Peak Oil Investments," but in many cases what I've actually done is to warn readers to stay away from particular sectors.  This bait-and-switch was compounded for my syndicated readers at Seeking Alpha when their editors decided to re-title the early articles in this series "Peak Oil Investments I'm Putting My Money On."  If you've stuck...

Tom Konrad CFA There are two types of solution to the liquid fuels scarcity caused by stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies.  The most obvious is to find a substitute to replace oil.  These substitute have barriers to their use as a replacment petroleum based fuel.  Understanding those barriers also leads us to the investment opportunities that arise from these substitutes.  As I wrote the first five parts of this series, looking into potential substitutes for gasoline and diesel, it was clear that many potential substitutes would need...

Tom Konrad CFA The last ten years have brought a structural change to the world oil market, with changes in demand increasingly playing a role in maintaining the supply/demand balance.  These changes will come at an increasingly onerous cost to our economy unless we take steps to make our demand for oil more flexible. We're not running out of oil.  There's still plenty of oil still in the ground.  Oil which was previously too expensive to exploit becomes economic with a rising oil price.  To the uncritical observer, it might seem as if there is nothing to...

Charles Morand Last Friday, the WSJ's Environmental Capital blog noted how, according to HSBC, growing government efforts to de-carbonize the electricity supply across the developed world would hurt makers of power generation technology with high exposure to coal. Yesterday, the EIA released its Electric Power Monthly report for April 2009. In it, the agency notes the following: The drop in coal-fired generation was the largest absolute fuel-specific decline from April 2008 to April 2009 as it fell by 20,551 thousand megawatthours, or 13.9 percent  The April decline was the third consecutive month of historically large drops...

Last week, we alerted you to a report from Germany's Energy Watch Group called “Coal: Resources and Future Production,��? which predicts peak coal by 2025.  Readers of AltEnergyStocks are doubtless familiar with peak oil, the inevitable fact that as we consume a finite resource (oil reserves) at some point the rate of that consumption must peak, and taper off.  Serious arguments about peak oil center around "when" oil production (and consumption) will peak, not "if."   The same it true for other finite natural resources, such as natural gas, uranium, and even coal.  The difference with coal is the received...

Tom Konrad CFA Dr. Arthur Berman, of Labyrinth Consulting Services has taken a hard look at actual production data from  Barnett Shale in 2007.  What he found should worry anyone expecting this abundant, relatively clean, domestic energy resource to be cheap.  It should especially worry investors in shale gas companies, such as CHK, DVN, and XTO. In a panel entitled "Natural Gas Game Changers?" at the 2009 International Peak Oil Conference, Dr. Breman presented some results from his research into the actual production from the nearly 2000 horizontal gas wells drilled in the Barnett Shale in 2007.  The Oil...

I was tempted by greed, and I succumbed. Last week, I bought the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL), at $19.75 a share.   The Temptation I made the trade as a simple speculation.  I watch oil because the oil price is one of the key drivers of investor interest in alternative energy, although oil is only a true competitor for biofuel companies, not producers of wind turbines (at least until there are a significant number of plug-in electric vehicles.) With crude trading below $40/barrel, oil producers are cutting back on new drilling.  This is...

David Gold With all the complexities of cleantech policy and technologies, there is only one simple thing needed for an explosion of competitive clean technologies – increased price of fossil fuels. The amount of R&D expenditures that will need to be invested in clean technology in order for it to hurdle the bar into competitiveness is much greater with low fossil fuel prices. And, the lower those prices, the less appetite the private sector has for making such investments. This leaves a much-increased burden on the back of government through grants and subsidies– a back that is...

A couple of interesting items in the news yesterday on topics dear to alt energy investors' hearts. Firstly, a new report (PDF document) by CIBC World Markets arguing that globalization could be reversed by high oil prices. The folks at CIBC WM contend that growing shipping costs driven by higher prices for transportation fuels could erase the Asian labor cost advantage, driving a renaissance in North America's manufacturing sector. What's the main culprit? Peak Oil, albeit not called directly Peak Oil. I watched an interview with Jeff Rubin, CIBC WM's Chief Economist, on Bloomberg's In Focus yesterday, and...

Garvin Jabusch A train, loaded with coal, crashed into the back of a passenger train in Czechloslovakia in 1868. Securities of fossil fuels firms, as an economic sector, may soon be on the decline. Predictions as to when oil, gas and coal will become a smaller part of the investment society makes into its total energy mix in favor of renewables (such as solar, wind and ocean energies) vary, ranging from 2060 on the long side (this prediction from oil industry powerhouse Shell) to 2030 or even...

Green Energy Investing for Experts, Part II Tom Konrad, CFA The next Tequila Crisis will be a peak oil crisis.  Mexico's government is dependant on revenues from declining oil fields.  The prospects for replacing these revenues look slim.  Shorting Mexico Country ETFs looks like a good way to hedge market exposure. In Green Energy Investing For Experts, Part I, I discussed why it makes sense to use companies and sectors that may be hurt by peak oil or climate change as a hedge against the market exposure in a green portfolio.  In Mexico, peak oil is already a reality. ...

Peak What? Eamon Keane The Energy Information Administration (EIA) released its Annual Energy Outlook 2010 (AEO 2010) last week, with projections out to 2035. It makes for interesting reading. Most notable was its take on peak oil, natural gas vehicles and on converting natural gas to liquids (GTL). An otherwise reasonable report was marred by the presumption of oil plenty. Figure 1 shows a graph presented (.pdf) by Glen Sweetnam, director of the EIA's International, Economic and Greenhouse Gas division, in April 2009. Although it mentions the source as being the...

Tom Konrad CFA The unprecedented boom in natural gas supplies over the last few years as been one of the few tail-winds for the US economy over the last few years, as plummeting natural gas prices have lowered costs for both industry and consumers.  Few outside the natural gas industry even understood the shear scale of the shale gas resource, although industry insiders did. The Shale Gas Glut In 2008, I recall a natural gas executive complaining about how he could not get policymakers to understand the sheer scale of the shale gas resource.   To be honest, I...

Two months ago, Tom told us how he'd dipped a toe into the black stuff (i.e. bought the OIL etf) on grounds that current supply destruction related to the depressed price of crude oil would eventually lead to the same kind of supply-demand crunch that led oil to spike during the 2004 to mid-2008 period. If you need evidence that the current price of crude is wreaking havoc in the world of oil & gas exploration, look no further than Alberta and its oil sands. The oil sands contain the second largest oil reserves in the world after...

Tom Konrad CFA Anew report written by Nathaniel Bullard at Bloomberg New Energy Finance highlights the difficulties large institutional investors would have divesting from fossil fuels. What it does not specifically discuss is that these difficulties could lead to large financial losses for investors who see the difficulty of divesting as a reason to delay. Just as we can't easily fill up our cars with solar power instead of gasoline, the report points out that there is no asset class that can directly substitute for oil and gas in large institutional portfolios. A person...