Fortune article about Richard Rainwater has thrown the issue issue of Peak Oil into the limelight again. This time, with a little more worrying and less 'denial of issue' from the federal governments.

For those that don't know, Peak Oil is the theory that oil production has (or certainly will in the next 5 years) peaked and that the remaining reserves of oil in the world are now costly to exhume. Basically, the end of cheap oil and energy. And that, apparently, has as dire consequences as running out of oil itself.

The big time armageddonists ( http://www.lifeaftertheoilcrash.net and http://www.dieoff.org ) believe that there is not the time to switch to alternative fuels and that anyway, all realistic alternatives are also finite (gas, coal, uranium). As renew-ables wind, hydroelectric, bio-fuels and solar energy are expensive, both in terms of currency cost and energy cost the big question is: How do we continue to fuel and power the great industrialised world?

Well, frankly, they believe the end of industrialisation and pretty much civilisation is nigh. Possibly within a decade, certainly within the next 25 years. We all then panic, riot, descend into anarchy and then try to grow our own crops to eat.

Now i am on the fence here (have been for a while) but the popularity of Peak Oil theory is growing exponentially in the states. The hysteria alone could trigger some interesting market movements.

Question is - how does one profit from it? Discuss. ;-)

AMC

The answer to that is really quite simple IMHO. I first heard about PO about 2 years ago, and have since read stuff by Kunstler, Simmons, Heinberg, Campbell et al. Even if you believe the peak is some way ahead, you can not deny that it will happen, since oil is a finite commodity. The cost of energy is going to continue to rise.

A good bet is oil exploration companies. I hold Burren (Bur), which I bought at about 2 about 2 1/2 years ago. It is now over 9. Oil has risen almost 30% p.a. over the last 6 years and in my view will go much higher. You can still buy US oil companies (majors eg Exxon, conoco, chevron) on PEs of less than 10. Even BP and Shell at PEs of about 12-14 look cheap.

Alternative energy companies like Ceres and TCM look interesting. How about British Energy as the UK looks to switch to Nuclear for energy requirements? Then there are the energy co`s who are likely to be taken over by foreign companies.

In short plenty of opportunities but DYOR.

rgrds
gk