Help on understanding peak oil

[candieplastique]

My boyfriend and I just broke up. Before he left, he talked me into investing in a lot of oil companies with money I earned years ago. He was going on about this peak oil thing. Anyway I have been doing some reading on the internet on energy digging and rigzone. What is the peak oil and shoul I stay in these investments. Please help.

Candace

[candieplastique]

I just read the first message on the page about what to put here. I hope to get into the discussion as a good "amateur" because I read a lot. My boyfriend and I were together about 4 years and we talked a lot about oil reserves and world demand. The peak oil thing seems fairly new. I would welcome any discussion. I have some input as I am invested with a lot of my retirement.

Thanks,

Candace

[seahorse]

C,

I'm no expert, only one that came across this topic of PO by accident several years ago and have been fascinated ever since.

I have learned first and foremost just to appreciate how important energy is to our way of life, from the making of the computer I'm using to filling up my tank. It is true that cheap energy has built the very world that we live in, and that more and more energy, cheap energy, is needed for their to be economic growth.

As you know, there is a debate about when world oil production will peak and then decline. There is a further debate that, even after world oil peaks, how bad will the decline be and can that fall in production be made up with other energy sources.

Some optimists like Lynch, Yergin, and CERA argue that the world will not peak until about 2030 and it will be a nonevent bc by then, other energy sources will make up for oil depletion.

Some people say, yes the world may peak, but it is not the end of the world, bc the decline rate will not be bad and the world will make up for it. A guy named Boone Pickens, Texas oil Tycoon falls into this category, as well as a poster here named ReserveGrowthRules.

There are some pessimists, like Deffeyes, Simmons, ASPO that believe peak is happening now or by 2010 and, the decline rates may be bad enough that it will devestate the world economy.

On another website, called the oil drum, there is a lot of analysis done modelling oil production and the like, and there seems to be a majority there and here that believe PO will occur somewhere between 2010 and 2014. Whether it will be devastating depends on the decline rate, which is an unknown. There is a report called "the Hirsch report" which can be found here that says it would take the US 20 years to mitigate serious economic effects of a world oil peak. This is a hotly debated topic.

As for investing in energy, is it a good bet? An insider named energydigger that post here and who has his own website says it is. I tend to agree for a host of reasons, if for no other reason it seems clear that with each year, the world increasingly depends on the Middle East to increase its oil production. Assuming the ME can increase its production, its so politically volatile that it doesn't seem likely. If they don't, can't, or in fact decline, then the price of energy will rise, so investing in energy seems as good a bet as any; however, you get what you pay for, and that advice was free.

[NEOPO]

Do you really really want to know the truth?

What if the truth makes you feel all dirty inside?

IMHO - Depending on the Company, most people with the knowledge of peak oil would say that your investments are more then safe AND EVEN that they are golden with a capitol G.

That is what someone would tell a client or other anyways

The reality - Peak oil is far from just a "play" on the market and I think that you are in for more "dividends" then you could have ever imagined if you truly intend to get into a "good" discussion about peak oil.

Check it out please:

The End of Suburbia promo trailer <---link to video

That's putting it mildly.

I will put it like this - to many here - not neccessarily myself but definately to many - the ramifications of peak oil and "other" significant factors that many see converging upon mankind at the present indicate something they refer to as a DIE OFF which is rather self explanatory.

Global warming/climate change, geopolitics/war and a bunch of other "scary" or "unsettling" topics all seem interelated with peak oil and after being here personally for over 18 months I can honestly say that these connections seem very real to me.

Lastly - to the outside world this topic is nuts and oil will never run out....
Its all a conspiracy, scam, fraud and the nightly news seems to attempt to confirm this as often as possible with their brilliant economists who know more about geology then the geologists of course and the geologists that do say much in opposition of peak oil are on someones payroll so the math is easy.......
Have you ever been called "crazy" before?
That about sums it up dont it folks?

18 months ago seems like an eternity in a sense as that was when I was born again.
peak oil saves!!!
Perhaps this knowledge will not have a similar effect on you yet do not be surprised if it does.
How is that for a welcome?

Oh yeah good thinking seahorse - disclaimer - no expert here either so dont sue me if your investments fail because oil "plunged" to $5 a barrel!! yeah right!!

I know I forgot the "we're all gonna die!" part...I always screw that part up!!

[pup55]

My boyfriend and I just broke up

he talked me into investing in a lot of oil companies with money I earned years ago

He may have done you two favors.

I am invested with a lot of my retirement

Hopefully this dough is in an account without a lot of annual fees and/or a fee when you cash it out. That way it'll grow faster. If your boyfriend was a mooch, or a stockbroker, he may have had you put it in some scam account where you pay a fee to maintain it, etc. etc. and if that is the case, get it out of there and put it in a normal 401K without fees or big expense ratios.

If this stuff is in a 401K account, you will have to pay a penalty if you need to cash it out for some reason before you retire. However, everything you make on it will be tax deferred. If it's in a regular account, like an E-trade account, you will have to pay a commission to sell it, and taxes on the profit you make, so mentally subtract that from your total.

Far be it from me to give anybody advice (although I give people advice on here all the time) but you have at least one thing in your favor: You have somehow managed to accumulate savings. Also, presumably you have a job, and your expenses are less than your income. This is a winning combination if you can keep it up for the next 30 years.

Depending on how long ago you made this investment, you are probably pretty happy about now.

There is one minor issue: diversification. Remember Enron. Hopefully this investment is in a mutual fund, or sufficiently spread out among different companies so that you do not have to worry about felonious executives blowing up the company and then building a 3 million dollar house with your retirement.

Also, if you are sitting on a lot of consumer debt, you might want to take care of some of that promptly. It's kind of pointless to be making 8% on your oil stocks, but paying out 14% on credit cards.

Other than that, you are good. Go to the office Christmas party this year, and with cocktail in hand, be sure to brag about how well your oil investments are doing, and I predict you will find another boyfriend pretty fast.

[EnergyDigger]

Candace,

great to hear from you on the forums here - there was one fellow on these forums that gave me grief over the EnergyDigger.com forums and said there was no way that anyone could take us seriously because I used your comments on the EnergyDigger.com website... good for you coming in and working this thing over - sorry to hear about your boyfiriend but one of the guys was dead-on correct, just stay with your petroleum investments and the guys will be coming around in droves wondering how you did it - LOL

take care - EnergyDigger

[mrflora]

Hello Candace,

Well you've certainly come to the right place. Peakoil.com is your one-stop shopping center for despair and demoralization on the Web. I recommend you start out by reviewing the threads on how to cook and eat human beings, then check out the thread on how to stuff your valuables up your a** to prevent them from being stolen by looters. After you finish this, you'll probably feel all dirty inside like NEOPO. You'll fit in nicely!

Regards,
M.R.F.

[RonMN]

Candie, first of all...welcome

Peak oil is hugely an economic problem.

- Our economic system is based on growth.
- Without growth in energy, we will have no economic growth.

End result...economic collapse...2nd great(er) depression that doesn't end.

Where to invest? That's a huge discussion that's been going on here for quite a while...Oil, gold, silver, food, ammo, land, friends-family-neighbors, camping equipment, tools, etc.

May i suggest you check out the "planning for the future" threads.

[ThePostman]

[quote="What is the peak oil and shoul I stay in these investments. Please help.

Candace[/quote]

You could check out the advice from Richard Rainwater (billionaire investor, PO believer) who made his fortune by capitalizing in times of crisis.
Here's a lead -
http://money.cnn.com/magazines/fortune/ ... 6/8364646/

[candieplastique]

Thanks all for the interesting introduction. I actually contacted the webmaster at energydigging and got some information. He posted a comment on his site but that was mostly just a joke. His emails to me were nice. My boyfriend was OK but he did not control my money. I have the investments on my own. ExxonMobil, Encana, Valero and some others. Less than $200 thousand. Not enough to retire on but important to me. I used to dance in Atlanta but I'm mostly retired now. My daughter is in college. I earned my money dancing but I held onto most of it. When you are 48 yrs old, you think about retirement.

It seems to me that if we have this peak oil production, then oil will not keep up with demand and the price will go up. I think this must be good for the oil companies because scarce oil will bring higher prices and profits. But you can't make applesauce without apples. What happens when the oil companies don't get enough oil to sell. There must be an upper limit to prices. Then they sell less and profits go down. No more apples. When does that happen?? That is the big question for me. When do I sell? What will the signs be? I guess it is not so much when is peak oil. When is peak stock price?

Thanks all

Candace Pierce

by the way candie plastique was definitely not my stage name. Some of the girls used to call me that so I use it in another chat room

[pup55]

When you are 48 yrs old

,

My bad. You sounded younger.

I have the investments on my own. ExxonMobil, Encana, Valero and some others

Stay the course.

you think about retirement

$200K, at 15% per year (this year it was more like 8%) will get you an income of $30K, so liveable, but not extravagant. Plus, you will have to pay taxes when you sell it.

It seems to me that if we have this peak oil production, then oil will not keep up with demand and the price will go up. I think this must be good for the oil companies because scarce oil will bring higher prices and profits

Potential problems: 1. The economy going to hell and the gas price going back down because people cannot afford to drive. 2. The democrats taking charge and slapping a lot of confiscatory taxes on these guys, thus causing them to not make as much money. 3. Political chaos, like happens all the time in places like Nigeria, causing these companies to lose a lot of money on plants and infrastructure that they built. This happened in Iran in 1979.

Still, all in all, you are right, as long as these companies have oil, and as long as people want oil, they have an excellent opportunity to make money.

When do I sell? What will the signs be?

When you see oil companies featured on the cover of Money or Forbes magazine, or in the Atlanta paper, with a caption to the effect of "Oil investments will go up forever and cannot fail" then this is probably about the time to start getting some money off the table. A similar indicator is if you are sitting in a restaurant, and you overhear two waiters talking about their oil investments, it's time to cash out. This indicator apparently was perfectly successful in the dot-com and real estate collapses.

There are many other theories on this.

Note: I am not a professional. Do not believe everything you see on the internet. Do not take investment advice from anyone who has a job.

[nero]

Welcome Candieplastique,

The companies you named sound like good conservative investments. You raise a good point about the oil companies running out of oil themselves. One of the longer term trends that has been mentioned on this board is exactly that. The large international oil companies are having a very hard time increasing their production rate organically. Some are even declining as their oil fields age and they fail to find new ones. Some of the things to note when you read the company reports is that they will use oil equivalents (oil and gas) instead of just oil, they will trumpet increases in reserves not increases in production and they will lump in their acquisitions with their own discoveries.

If you are worried about buying into companies that are running out of oil, I suggest you focus on the companies that are working in the growth side of fossil fuels. The growth side is in heavy oil/oil sands, tertiary extraction, heavy oil refining, unconventional gas and last but not least, coal.

Some things to avoid are companies that focus on production sharing agreements with foreign governments. There is a long term trend of countries renationalizing their resources. This is very bad news for the company who has invested billions of dollars of fixed assets in that country.


(standard disclaimer that this advice is worth exactly what you paid for it)

[candieplastique]

Some good advice here. I see that some of my stock goes up and down with the seasons like Encana. I'm sure that must be because of heating and gas for electricity. Will peak oils be the same for gas? Will the yearly swings stop as prices go and stay higher. I think they will. That might be a sign.

Candace

By the way 48 is not that old. I still dance a little. My other job keeps me busy. I'm also a pet groomer. Lots of dogs to wash clip and curl. I work out at the gym also.

[Aaron]

Welcome

Free advice is worth exactly what you paid for it...

That said:

The last barrel of oil will be worth more than all previous barrels together. Not literally true, but fits well as an investment paradigm.

The real investment opportunities are downstream from the producers & refiners IMO.

The service & manufacturing industries which serve the producers & refiners are set to enjoy record growth as oil prices rise. There are numerous mid-sized companies which will experience exponential growth because of the heroic amounts of money trickling down from the oil majors. The oil majors are a safe investment, but are a very large financial vehicle with many participant investors, so the net growth of these companies tend to be slower growth in larger amounts. The right pick in the services or manufacturing industries could be a potential bonanza for a smart investor.

Think refinery & production service companies, Government regulatory compliance companies & manufacturers of specialized refining & associated equipment.

With companies & governments already demonstrating their willingness to refine just about anything into fuel, it's a pretty sure bet that many of the companies who support this process will experience growth. Tar Sands from Canada... SugerCane from Brazil... Ethanol from the US... etc...

My pick for investment opportunities would be companies which service & support sour crude refineries. There is currently a rash of refurb projects for old decommissioned sour crude refineries going on world-wide & in the US in response to the price of sweet light crude. It's the basis for Valero's business model. They make more money refining sour today than mid or sweet... which is a reversal from historic patterns.

These more risky investments should be hedged against loss with companion investments in big oil stocks, which should also grow, just more slowly. Maybe 25% in smaller service companies & 75% in more stable oil majors sounds right.

I should mention that this is all in pursuit of traditional retirement goals, which usually means you stop working at some point. While some folks can maintain their vitality after leaving their career, many folks can't & retirement becomes a lingering death sentence which lacks the substance that made you choose that life to begin with. Be careful of the things you own, they end up owning you.

IMO the key to retirement is simple... don't ever ever do it.

Your role will naturally evolve as you age of course, but it is to our collective disadvantage that we devalue the experience of our elders. In our pursuit of eternal youth, we have all but abandoned the wealth of knowledge which can only be achieved through long experience. And it shows in almost everything we do...

We shape our lives the same way Michelangelo sculpted... Carve away everything that does not look like your goal.

What's left... is your own personal truth.