Oil and Natural Gas Investments: Why You Should Invest in Black Gold
by Alexander Green, Chief Investment Strategist
Thursday, December 3, 2009: Issue #1150
Some day in the future, human beings will likely colonize Mars. But if I suggested you invest in its colonization now, you’d rightly think I was a few cards short of a full deck.
The same is true of much-ballyhooed “alternative energy.”
Someday, nano-engineered solar panels and wind turbines may power the nation and the rest of the world. But it won’t be anytime soon. Today, wind and solar combined make up just one-sixth of 1% of American energy consumption.
As for the Cassandras who insist we simply don’t have any choice but to look elsewhere and that our planet is running out of oil and natural gas… well, take it with a whole shaker full of salt.
Here’s why – and how we can play the current oil and natural gas investment situation…
How to “Run Out of Oil” Multiple Times
Consider this from Pulitzer Prize-winning columnist, George Will:
“In 1914, the Bureau of Mines said U.S. oil reserves would be exhausted by 1924. In 1939, the Interior Department said the world had 13 years worth of petroleum reserves.
In 1970, the world’s proven oil reserves were an estimated 612 billion barrels. By 2006, more than 767 billion barrels had been pumped and proven reserves were 1.2 trillion barrels. In 1977, Scold-in-Chief Jimmy Carter predicted that mankind ‘could use up all the proven reserves of oil in the entire world by the end of the next decade.’ Since then, the world has consumed three times more oil than was then in the world’s proven reserves.”
The world’s population is rapidly rising, of course. And so is discretionary income. Nearly 2 billion of the world’s 6.2 billion population don’t have electricity and have never flipped a light switch.
So surely that means nuclear power is likely to play a major role in meeting future energy demand?
Nope.
Forget Nuclear… Oil and Natural Gas Will Still Rule the Energy World
By 2050, there will be more than 10 billion energy consumers. If nuclear power is to supply even 10% of our carbon-free energy, the world would have to build more than 50 large nuclear power plants a year. Currently, five a year are being built.
Our primary energy source for the rest of our lifetimes will be the same one that has dominated for the past 150 years: oil and gas.
Despite all the naysayers and finger-waggers, that’s not an insurmountable problem. The world’s deep-water oil and natural gas reserves are significantly larger than was thought just a decade ago. And higher oil prices have spurred the development of technologies for extracting them.
That means the cost of developing Canada’s oil sands, for example, are quickly declining. Projects that weren’t viable last year now are, with oil at $77 a barrel.
As for natural gas, U.S. known reserves – including the Marcellus Shale, – which contains more natural gas than the North Field in Qatar, the largest field ever discovered – exceed 100 years of supply at the current rate of consumption. And those reserves are sure to become larger.
Two Huge Commodities… And One Investment That Capitalizes on Both
Let other speculators chase the high-risk venture capital investments in alternative energy sources. Oil and gas are here to stay. Bank on it.
Or better yet, pick up a few shares of iShares Dow Jones US Oil & Gas Exploration Index (NYSE: IEO). Here are three reasons why you should…
- It’s well-diversified, holding Anadarko Petroleum (NYSE: APC), Apache (NYSE: APA), Chesapeake Energy (NYSE: CHK), Devon Energy (NYSE: DVN), Noble (NYSE: NE), Occidental Petroleum (NYSE: OXY), Valero (NYSE: VLO) and many others.
- It’s liquid.
- Costs are low – annual expenses are less than half of one percent.
Good investing,
Alexander Green
Related Investment U Articles:
- The Second-Coming of the Texas Oil Boom
- Peak Oil is Long Gone… And the World is Still Asleep at the Energy Wheel
- $200 a Barrel Oil? This Man Says, “No Way!”
- The Spotlight Shines on Natural Gas, As Japan’s Nuclear Fallout Continues
- Natural Gas Price Forecast 2012
10 Responses to “Oil and Natural Gas Investments: Why You Should Invest in Black Gold”
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Alexander Green is the Chief Investment Strategist of Investment U. A Wall Street veteran, he has more than 20 years of experience as a research analyst, investment advisor, financial writer and portfolio manager.
Very interesting points!
I trade on oil since it was $60, and looking forward to seeing $95 in 1 or 2 month.
The trend is once the oil and gas getting more expensive, the public would like to use as more green/env friendly energy as possible, and cheaper…
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C’mon, this is the one of the most blatant ramps and poorly presented justification for an oil buy that I have read in a long time! You can do much better than this! What you need to factor in are -
1. those same 10 billion people in 2050 are more than likely to have had the benefit of a further FORTY years of alternative power development and implementation. Most likely not to be needing much if any oil.
2. If we are still using oil then don’t forget that since all this historical oil burning has already melted the Arctic we are going to have access to a whole bunch more oil that will then give a helping hand to melting the Antarctic next.
3. a) Wars b) viruses c) population control due to realising that there are too many people will more than likely not allow us to reach 10 billion population. Mother Nature has a way of dealing with pests!
4. You would have a far better justification for oil if you simply had kept your focus on the next 3 years as the world economy recovers and we possibly edge back up to $150 per barrel. That story I can buy!
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Put my words here today, if would be a fact that oil up to $150 again, then the another recession coming soon…so don’t dream on that, hehehe
I like Alex’s point as black gold always is a best investment choice, but it connects to much politics, and people as you are greedy human once it comes to money…
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A well-written article with solid, common sense. This is the type of article that is neededd for sound, rational advice.
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Would have like to read about an investment for the off chance possibility that Israel might strike Iran and send oil prices skyrocketing.
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Thank you for the email with “Why you should buy Black Gold now”. I am thoroughly in agreement and am sitting on energy stocks and ETF’s doing OK and waiting for a supply disruption that is sure to occur due to all the world’s tensions and religious/political pressures as they have in the past. Thank you for the tip on IEO ETF. It was especially nice to receive your email with good info and not the too numerious “teasers” that seek a subscription to yet another investment letter.
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I think Alex is right.It is because the oil and gas we use now come mainly from land and shallow water of the sea.Don’t forget the ocean occupies 70% of the global area where the chance to strike oil and gas is really high.But it is very costly to exploit them.When we run short of oil and gas,then the price of oil and gas will certainly shoot up.It will be economically feasible to exploit them from the deep ocean.
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You say one-sixth of one per cent of energy consumption is solar and wind? I think that figure is significantly low or significantly out of date.
Solar panels to power decorative lighting approach your figure all by themselves.
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When I joined the Oxford Club, I received the Urgent Investors Report “Make 2,689% on the Biggest Energy Boom in 127 Years…” This report profiled the 7 “Profit Plays’ in uranium. What happened since then to dull uranium’s luster?
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Its very amazing what is happening with oil and all this discoveries. There is oil in South Africa that has just been discovered by a small company its about 23m barreles of oil.
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