[extropy-chat] Debate on Peak Oil

[Hal Finney]

Samantha Atkins writes:
> On Apr 25, 2005, at 7:36 AM, Brian Lee wrote:
> > Isn't it unlikely that the entire world is in denial? Wouldn't some 
> > enterprising investor (including the Peak Oil proponents) slap a few 
> > million down in order to get 300% returns in 5 years? It seems that if 
> > anyone actually believed that oil would be at $200/barrel in 5 years 
> > that futures prices would be edging up there to reflect a valid 
> > present cost.
>
> Please describe how you would play it if you believed it and had some 
> cash.  I am quite interested.  Prices are edging up with constraints to 
> ease the correction where we still can.  I don't personally think we 
> will have that luxury for more than another year more, two at the 
> outside.

The straightforward way to benefit from a rise in oil prices is to
own oil.  The commodities markets are risky but there are ways to do it
which reduce the risk.  There are many web sites available to describe
futures and options which would let you directly invest in oil (perhaps
more accurately, bet on a rise in oil).

You could also buy stock in oil companies, concentrating on ones that
have large proven reserves.  Some people point to the consolidation in
this industry as evidence that insiders (oil company executives) think
that the market is undervaluing the industry.

Investing in alternatives to conventional oil is a possibility as well.
Canadian companies with their tar sands, or more exotic alternatives like
solar and wind, may become bigger players as conventional oil runs short.

One problem is that even if the Peak Oil scenario is broadly correct,
things may not play out exactly according to the script.  Suppose that oil
prices continue to climb over the next few years, and this depresses the
world economy enough that we fall into a stubborn recession.  This could
reduce demand so that the price stops rising, or even falls.  Oil usage
drops quite a bit during a recession, as during the 80s.  There was even
a small decrease in consumption from 2000 to 2001 to 2002.

The Peak Oil proponents could be right but oil prices could still fall,
and then investments made on the opposite assumption would not pay off.
There are no certainties!

Hal