Image via WikipediaPeak oil! We've debated that term since the 1970's oil shocks. Back then some experts were predicting peak oil by the turn of the 21st century. Some said 2010, others as far out as 2030. However, according to the IEA, we passed the date for peak oil almost 5 years ago, in 2006. According to other distinguished scientists, who peer reviewed the IEA data, in Stockhold Sweden, even the IEA data is somewhat skewed toward the positive, indicating a dirth of oil is already upon us, and forshadowing prices that will make 2011 look like the good old days of cheap oil.
Review the video for yourself and make your own conclusions!
Then, invest accordingly.
Solid oil plays in the medium to long term.( We like SuncorSU and CenovusCVE)
Alternatives like wind, solar, nuclear, fuel cells (we like BallardBLD)
And lithium, (we like TalisonTLH, RodiniaRM and TNRGoldTNR) in the long term!
As I have said before, it is never wrong to take profit. While no one can time the market (and I certainly am not attempting to do that here) however, taking profit when you are doing well is simply good common sense, especially at a time when macro events may tip the scales against your investment strategy,
As you already know, I like commodities! I like hard assets and hold gold, silver, lithium, copper etc. I believe that, in the long run, these are great investments. I am concerned at this time, about the strong head winds which seem to be rising at this time in equity markets, and so, today, I took some good profits off the table and sold off shares.
I have done this for the past two weeks in fact, taking profit in the following companies:
The recoverable resource base is now 1 Trillion barrels of oil, with two Trillion more in reserves. Yes, that is Trillion!!
The Athabasca oil sands (not the company of the same name) in Canada is far and away, the largest deposit of oil on the planet, dwarfing the 250 Billion barrels of the entire Middle East. This resource alone can power the entire continent of North America, for the next 100 years. So why do Americans believe that the Middle East is their biggest supplier of oil (it is not, Canada is) and why is there a general misconception that the Middle East is where all of the oil is (not!). Even the vaunted New York times still believes Canada is second to the Middle East with 175 billion barrels of oil. Even most Canadians don't realize the enormous resource they are sitting on. It spans across northern Canada in a mass larger than England (The country!)
I guess the answer can be found in the constant barrage of news, both good and bad, that emanates from the middle east on a weekly basis. Conservative, soft spoken, boring old Canada can't compete with all that noise, but it certainly can compete in the energy industry. The largest supply of oil on the planet and that does not even include other reserves such as the Bakkan or what may lie beneath the arctic circle!
With oil companies from every country salivating over what may lay beneath the Arctic circle, Canada, you must remember, owns 25% of the Arctic! Canada also lays claim to over 20% of the worlds water supply (with only .03% of the worlds population),the second largest deposits of natural gas and coal on the planet, More Diamonds, potash, gold, copper, wheat and nickel than any other country as well as great stores of Lithium, Rare Earth elements (REE's) lumber, seafood, gypsum, wheat, cattle, and more!
Canada has paid down deficits for 9 of the past 10 years, has the most stable banking system in the world and a friendly, conservative government that is business friendly. These are only some of the reasons why the Canadian dollar (the Loonie) has had a stellar year, and will for many years to come.
However, I digress, because this article is about the tremendous resource (and investment opportunity) that is the Athabasca oil sands. Stretching through the north of two provinces, Alberta and Saskatchewan, the oil sands are massive. Since the invention of the "steam assisted gravity drainage system (SAGD) the oil sands have been a booming place for investors. Given the massive resource base, that boom has only really scratched the surface (excuse the pun).
The bitumen could cover the entire country of England, and is as deep as 140 feet. Why do companies persist in destroying the gulf of Mexico, and the beaches and marshes of the southern states, when they can literally set up shop on the sands, shovel the bitumen into what is essentially a giant washing machine, and produce enough oil to power our cars, homes, power plants or whatever, for the next 100 years and beyond. Not only that, but you can ship it through pipelines to the U.S. market.
Just promise the friendly Canadian government that you will clean up after you leave, and you have a viable, 100 year energy operation that will make money for you every year. The biggest consumer of the product is right next door, with an insatiable appetite and it now has the political problem of explaining to it's citizens why 1/4 of the American marsh land is in jeopardy of being destroyed for the next 10 years.
Do you even wonder why the Chinese are now buying into this massive resource? (And backing a pipeline to the Pacific coast so they can ship raw bitumen back to China for processing)
It's time for America to wake up, and smell the oil (and the money)!
(Disclosure - No holdings)
Our top pick in this environment is Cenovus oil (CVE). In 2009 Encana split it's oil and gas assets with Encana (ECA) keeping the natural gas component and a new company, Cenovus, keeping the oil assets (with some nat gas). In Q1 2010, Cenovus boosted it's production by 66% Cenovus has the best technology for processing bitumen in the oil sands and it is getting even better.There is no exposure in the gulf offshore drilling. Expert high on Suncor - Cenovus - Canadian Oil
What would these two events do to the economic outlook of North America, and the world, for the next 50 years? Are these events even possible? Are they likely? Are they "pie in the sky" theories?
In a recent article ( see World changing technology ) we discussed a new, technological breakthrough, by a small California Company, Carbon Sciences, which may allow large emitters of CO2 to not only capture it, but turn the CO2 into gasoline.
As if that announcement wasn't eye opening enough, they claim that they can do this with no measurable pollution result. Researchers also state that the process will work just as well with oil sands and shale deposits. As if that isn't enough to get investors attention, they advise that, although it can be refined in traditional refineries, this synthetic oil is best refined in micro refineries which can be built for 25% of the cost of today's refineries. The United States Government has already approved construction of one such micro refinery to test the UTA Lab's breakthrough technology.
The coal being used is one of the cheapest, Lignite, which is found in abundance in Texas and around North America. Texas lignite coal sells for $18 per tonne. The coal conversion technology uses one tonne of coal to produce 1.5 barrels of crude oil. One barrel of crude produces 42 U.S. gallons of gasoline. In other words, $18 worth of coal yields 63 gallons of gasoline: 0.28 cents per gallon! In other words, if this technology proves out, both the USA and Canada (as well as many other democracies around the world which have abundant supplies of coal, will own centuries worth of cheap energy, and become net exporters of that energy!
Without having first hand knowledge, I will wager here, that the oil industry has a big stake in this technology and who better to develop such innovation than the deep pocketed U.S. oil companies. It is in their financial interests to keep the good ole US of A hooked on it's product(s). As both China and India grow their middle class, energy production needs to use every resource.
As Natural Gas companies ramp up production from traditional finds as well as giant shale deposits which exist all over North America, the price of that resource continues to drop. North America has the largest deposits of Natural gas in the world today, and that resource alone could power North America for hundreds of years.!
So how do we, as investors, digest this new information and how can we make it work for our portfolio's?
In the short term, until new technologies are accepted and come on stream, the price of oil will creep up as this shaky recovery takes shape. However, as these technologies get proven and are adopted large scale, the price of oil could sink dramatically (still several years out). If oil can be produced from a cheap, abundant supply of coal, on shore in North America, without damaging the environment, then the whole dynamic changes. I'm not an economist, however here are some possibilities that come to mind:
1. Coal mining would intensify throughout North America, creating blue collar jobs in small communities currently devastated by the economic down turn, with the resultant economic spin offs to equipment suppliers and construction companies, to those mining companies.
2. A new boom in refinery construction would also create hard hat, engineering and tech jobs, as well as create the same sort of spin offs to suppliers.
2. Oil sands production will halt, because you cannot dig bitumen for processing at $25 per barrel. (Even though the UTA process works on bitumen as well as coal)
3. Investments in OPEC oil resources would be severely tested as demand from it's largest customer, the USA, begins to drop dramatically.
4. As more power plants can be built using cheap oil and Natural gas (as well as nuclear and wind energy), the demand for Electric Vehicles (EVs) will grow, along with the demand for Lithium which will be used to store energy.( A contrarian argument can be made here for the growth of Hybrid vehicles instead of electric, because of cheaper gasoline.
5. Shipping oil via tankers may drop significantly.
6. Railways will be winners as coal and natty gas are shipped throughout North America and more petroleum based products are again made on this continent and shipped trans continent. (Warren Buffet you old investor you!)
7. The usd will continue to slide, until these events begin to unfold, at which time it will strengthen once again.
8. Industry will return, at least in some form, to North American communities powered by cheap energy.
9. Huge, energy market speculators, like JP Morgan, will no longer be able to hold the American consumer hostage by holding tankers full of oil offshore and spiking the price so they can sell into the inflated market.
10. New Fuel Cell Stack, Power plants powered by plentiful natural gas will be built, reducing co2 emissions, and helping to "electrify" the transportation industry along with Wind Energy.
These are only some of the possible outcomes, and I am sure that more learned readers than I can come up with a myriad of possibilities. No matter how you slice it, if these technologies take hold, along with the Fuel Cell industry, the Lithium boom , Wind energy and Solar, and the advent of the Electric car, the economic outlook for this continent will brighten once again, as we lead the world in production and possibilities.
Image via WikipediaPeak oil! We've debated that term since the 1970's oil shocks. Back then some experts were predicting peak oil by the turn of the 21st century. Some said 2010, others as far out as 2030. However, according to the IEA, we passed the date for peak oil almost 5 years ago, in 2006. According to other distinguished scientists, who peer reviewed the IEA data, in Stockhold Sweden, even the IEA data is somewhat skewed toward the positive, indicating a dirth of oil is already upon us, and forshadowing prices that will make 2011 look like the good old days of cheap oil.
![Reblog this post [with Zemanta]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_uYkg6kPiODigP6FUtjjU4djf_OIXrn4YUpi7IMh8hCp_GxcvfaeJ9Yxhah5axRye_RSHf3yVzdqcCkfMqviQma4p02rVB6oeK3zGPkR3yI50pGNYPocqqVkBY_SEvtKJ761BHhuBGUEg2BY_ozpMDG=s0-d)