http://www.fool.com/news/commentary/2005/c...ary05082206.htm

The "fool" is my favorite personal investment tool- I tend to manage my portfolio on an annual basis, in other words, I open it on my own personal fiscal year (Usually the begining of Febuary right after taxes are done and any returns or payments are made) - so about early Feb- right before going to Hawaii for about 3 weeks - I go to my broker and we crack her open and check performance.

right after that meeting, and taking notes, I go home and consult the "fool" with my questions.

This year is a toughy. I have already invested pretty hard in debt collection agencies (a no brainer in the American economy )

But the debate on Peak Oil really is heating up- and oil prices IMHO, are going to determine the markets harder than ever soon. Lot's of variables here, too many for anyone to really guess, and it is a gamble!

An excerpt summary from the article:

http://www.fool.com/news/commentary/2005/c...ary05082206.htm

Foolish final thoughts
Which side is right? That's the million-dollar question. The arguments contrary to peak oil suggest that reserves are much greater than those currently reported -- which is true. However, oil sands and improved extraction technologies do not necessarily increase production rates; rather, these factors indicate that production can continue for a longer time. This is exactly the scenario that peak oil suggests -- that once the peak production rate is reached, new finds will be deeper under the sea, farther under the ground, and more expensive to produce. Reading through annual reports of ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP), or Total SA (NYSE: TOT) confirms that a larger percentage of new oil finds are coming from these types of sources.

If nothing else, my exploration for peak oil has convinced me that the current trend is driven by strong and sustainable forces. OPEC is not withholding oil from the markets as the cartel did in 1973 or 1980, and prices are not driven by fear as they were in 1990. As for peak oil, I tend to believe market forces will eventually cause the pricing cycle to reverse. However, that reversal looks like it will be several years into the future. Therefore, I am going to continue my exploration, looking at companies that are drilling deeper into the earth like Carbo Ceramics (NYSE: CRR), going deeper into the oceans like Cal Dive, and helping in the production of non-conventional sources of oil -- like the king of the aforementioned oil sands, Suncor (NYSE: SU).

for a little more info on "peak oil debate" for the investor - NOT the enviromental side- another excerpt from a different fool article:

http://www.fool.com/news/commentary/2005/c...ary05080905.htm

Today, forecasts are all over the map, but with at least 1 trillion barrels of known reserves, "imminent doom" is projected somewhere between 40 years and more than 100 years in the future. It is the production capacity -- the fact that these reserves cannot be extracted fast enough to meet rising demand -- that is driving price increases. Furthermore, the reserves are deeper in the ground or under the ocean floor, and many new crude reserves are of lower-quality oil.



So, for the small time investor-

1) Do you think peak oil will happen in the near future, and that we should heavily invest in things such as oil sands Suncor

2) Or is oil "strong and sustainable" for the 10 year investment cycle and we should invest in companies going stronger and deeper?

I know it is wise to hedge your bets and go into both - but just stating which way you "lean" without total commitment either way would be fine!

CR,

Hey, I've got a little experience with online trading. Made some good returns during the bubble, and hitting 35% goals this time around with a pittance thrown in there during the last techie contract.

First off, the market needs to be followed on a daily basis. That's rule #1. Second off, buy on bad news, rule #2. Third, don't sell a losing stock. Time is on your side, and the worst that can happen is -- well, total loss can happen. I'm still working on that one.

With oil, I have to ask a few questions.

Question 1: Is there a replacement for oil?

Question 2: Has a critical line been crossed?

Question 3: How's public opinion going?

Question 4: Is there a propaganda effort going on?

Question 5: Does contrarian thinking make sense?

So you want to buy on the low side and sell on the high, duh. However, some bets won't ever make sense due to the way things are working out. Will biofuel replace fuel oil? Can hydrogen ever replace gasoline? Does wind/solar/tidal/geothermal electrical production make more sense than coal-fired plants?

Finally:

Question 6: Is the true cost of petroleum hidden?

Personally, I would not touch oil stocks or futures with a 20-meter pole. My current bet is on Ford (F) due to its R&D into hydrogen internal combustion and movement toward hybrids, plus the depressed stock price. Yep, I've got some, won't get more, so buy, buy, buy!

It's a lot like following the betting trend at a poker table. Exactly like it, as a matter of capitalistic fact.

Personally, I think worrying about your portfolio in light of peak oil is misguided. When peak oil occurs (and it will), you would be a lot better off having your assets in something other than stocks. I am exploring selling my home and investing in a sustainable farm where I can build a secure alternative energy supply. I'm even considering the best time to liquidate my 401Ks, even with tax penalties.

1) Do you think peak oil will happen in the near future, and that we should heavily invest in things such as oil sands Suncor?

There is a range of opinion on when peak conventional oil production will occur. There are two independent lines of investigation that indicate a near term peak - the geologists like Colin Campbell and Deffeyes at Princeton using modified Hubbert techniques based on the rate of discovery and maturation of discovered fields and the analysis of the Saudi reserves performed by the oil investment banker, Mathew Simmons, by looking at hundreds or Aramco papers submitted to the Society of Petroleum Engineers over several decades. (See here for an on line interview with Simmons hosted by the Washington Post). On the other hand, you have the Yergin group, Cambridge Energy Research Associates, saying there is nothing to worry about for 20 or 30 years based on a proprietary field by field study. Yergin is a respected figure but CERA has blundered in the past. They issued optimistic forecasts for natural gas supplies in 2002 for instance. There previous oil forecast was similarly off the mark. Then there is the Hirsch Report that uses a time frame of about 10 to 20 years. Hirsch Report.

I think tar sands are a safe investment. Economically they are competitive at $20 or $30 per barrel. However, the way they are currently produced they are an environmental disaster with tremendous water quality impact problems and significant global warming consequences. I was at a conference recently when the speaker promoting tar sands admitted as much and suggested than nuclear plants located near the tar sands in Alberta might be a global warming friendly alternative for the tremendous amounts of input energy required to release the bituminous material from the sands. In any case, they will take a long time to scale up to make a really significant contribution. Oil shale has even more problems although Shell's new in situ process holds some promise.

2) Or is oil "strong and sustainable" for the 10 year investment cycle and we should invest in companies going stronger and deeper?

Anyone who discovers more oil is going to be able to sell it. That doesn't mean there will be enough oil production to sustain world economic activity even at current levels over ten years. I side with the pessimists on supply, I haven't fully reached a conclusion on the consequences. I think energy efficiency and alternatives could provide a positive path forward but don't see us taking the decisions with the urgency required to avoid economic turmoil.