[Asterisk]

As I see it, there are 2 crisis that are converging at the same time....global warming, and peak oil.

Global warming, as far as I can tell, is nothing but bad news. Crop failures, extreme weather, rising seas, etc. etc.

BUT....

Peak oil is another thing altogether.

Yes, peak oil will mean eventual collapse, BUT before the collapse, oil prices will go up and up and up. Anyone with even a cursory knowledge of the topic will agree with me there.

AND, it appears that we are indeed AT THE PEAK! If we aren't, then it's almost certainly a year or 2 away max.

That being the case, there must be some way to profit from our KNOWLEDGE that within the next year or 2, oil and gas prices are going to go up and up and up and up.

Part of me hates to invest in oil, because oil companies sicken me to the core. I would much rather get rich by investing in renewables....but that ain't gonna happen.

So, how can I 'bet' that oil prices are going to go through the roof in the next year? I only have about 3 or 4 thousand to invest, but knowing what I know, I would be willing to invest all of it! I would use the profits to get myself prepared (guns and long-term food are not cheap let me tell you!)

Oh God, my vegan Greenpeace father would disown me if he ever discovered that I invested in oil! haha

What do you guys think?

[Armageddon]

When this economy crashes, oil demand will plummet, so will oil prices.

[Asterisk]

Oil demand will plummet? What do you base this on?

Oil is not something that most of us CHOOSE to use. It is a necessity of life. We need it to heat our homes and drive our cars to work.

What do you base your statement on? Could you please post a link that backs up your claim? (I'm guessing not)

[SeaGypsy]

Even if every one of us liquidated everything and put it all into a tanker, it would not mean blip on the market. Sooner or later the price will be much higher than now; barring fiancial armageddon. I expect oil prices to outpace inflation by about double for the forseeable future. Meaning that 100 million dollar tanker will double in about 5 years, but 200 will only buy what 150 buys now. That's probably as good as it gets.
Trying to profit off short term fluctuations is hit/ miss at best and involves a lot of hours staring at a screen.

[Plantagenet]

Oil demand will plummet? What do you base this on?

Oil is not something that most of us CHOOSE to use. It is a necessity of life. We need it to heat our homes and drive our cars to work.

Necessity or not, if you don't have enough money to to buy oil, then you aren't going to be able to heat your home or drive your car or even afford a house or car. Just ask the millions of people who have lost their jobs, homes, etc. since the global recession began in 2008 as oil hit $148/bbl.

[Asterisk]

Even if every one of us liquidated everything and put it all into a tanker, it would not mean blip on the market. Sooner or later the price will be much higher than now; barring fiancial armageddon. I expect oil prices to outpace inflation by about double for the forseeable future. Meaning that 100 million dollar tanker will double in about 5 years, but 200 will only buy what 150 buys now. That's probably as good as it gets.
Trying to profit off short term fluctuations is hit/ miss at best and involves a lot of hours staring at a screen.

If we know that prices are going to go sky high, isn't there some way that we can make a killing off of it?

[SpringCreekFarm]

I think it is far better to spend your extra cash on reducing or eliminating debt. With all the talk about the money system collapsing, it doesn't make sense in relying on anything but becoming more independent from the 'system'.

<<< no debt and fewer worries because of it.....

[diemos]

Oil demand will plummet? What do you base this on?

Oil is not something that most of us CHOOSE to use. It is a necessity of life.

You'd better hope not or we're all dead.

We need it to heat our homes and drive our cars to work.

When oil hit $148 the economy got switched from credit expansion to credit contraction. The economy contracted, enough people got thrown out of work, enough businesses got shut down to decrease oil demand below available supply. When that happened the price of oil crashed down to its marginal cost of production.

As the economy is recovering, demand is going up and the price is climbing up. It is entirely likely that if stimulus gets turned off we will have another contraction in the economy and another crash in oil prices.

Whether the price of oil goes up or down the average american will be able to afford to use less and less of it going forward.

He will use less either because everyone has a job and the price skyrockets or because many have lost their job and even though the price is low they won't have any money in hand to buy any.

The contractionary scenario is the most insidious. You just throw enough people into poverty to bring demand below supply and the ones who still have their job can pretend that everything is fine. Oil is perceived as cheap and plentiful. Nothing changes. The poor are just dismissed and derided as lazy bums who should pull themselves up by their bootstraps.

The expansive scenario where the gov prints and hands out money will create howls of outrage but would be best for us in the long run. With oil expensive for everyone that would create the incentive for change; new investment in conservation, new investment in alt energy.

Selah.

[SeaGypsy]

I think there is a controlled slide underway.

It has been widely discussed that sovereign default is not an option unless the USA is prepare to go without imported oil, something we all know is currently impossible. Severe Austerity is not palatable politicly and would do massive damage. Inflation is the only answer.

Asia and emerging markets will take up any slack in oil prices, as will speculators. I think there is a solid floor under about $78 a barrel which would take an extremely dire and prolonged black swan event to push down.

Topwise depends a lot on financial diplomacy. The rest of the world has now chewed over and having trouble swallowing the situation the USA is in. A major cough could result in a choke. But the vested interests in controlled slide of the dollar are inestimably enormous; there is not a non basket case economy in the world which can afford to let the US market just fall off the map.

Those are just the external pressures. Internally the control aspect in dollar descent is the difference between gradually becoming a 3rd world country or a warzone.

Oil must go up.
The dollar must go down.
Too fast will cause a trainwreck.
The fed can try to lobby for a price cap; but the suppliers will always want more than the inflation rate, significantly more.

All of this creates increasing pressure to create an alternative reserve currency; to an extent that if there was a viable alternative up and running it would have aready been replaced. This is another motivator for controlled descent.

Bankers inside goverment obfuscate the predicament. The last thing they want is an uncontrollable surge in prices and an equity flood to oil.

Bankers outside goverment seem to have been put on a leash through the backroom deals involved in the various bailouts. I find it strange that it seems this way despite allowances for continued investment in outsourcing work; but
i guess bankers are arguing that they have to be able to make a profit, something they are not likely to do within the domestic market, or much less likely than overseas.

Reminds me of a terminal cancer patient I looked after who went out and caught incurable gonnoreah trying to drain a little more enjoyment from life.

[scas]

I think the best profit can be had by insulating yourself from the effects of peak oil and climate change. You can 'profit' by not losing everything.

We may be moving into a world where money has no value, and the economy doesn't exist as were used to.

My method of 'profiting' is to have land somewhere fairly isolated, with fertile topsoil, groundwater, and not requiring electricity and gasoline to maintain a decent standard of living. A basement full of potatoes, a few barrels of water, some weapons, an electric bicycle, handy skills and good friends may not be worth much now, but in harsh times may be worth more than a giant wad of cash.

[Outcast_Searcher]

That being the case, there must be some way to profit from our KNOWLEDGE that within the next year or 2, oil and gas prices are going to go up and up and up and up.

Part of me hates to invest in oil, because oil companies sicken me to the core. I would much rather get rich by investing in renewables....but that ain't gonna happen.

So, how can I 'bet' that oil prices are going to go through the roof in the next year?

As a moderate who doesn't believe the MSM is a vast conspiracy, I am in the "gradual overall rise faster than inflation, random fluctuations in the short term" camp on oil prices.

When you talk timeframes of a year or two, IMO that's speculation, not investment. Speculate away -- but I don't know how to reliably make money doing that.

To try to help, I will discuss oil related INVESTMENT ideas here a bit. I am talking about a, say, (at least) 5 to 15 year strategy which can withstand crashes in the global economy and oil prices, as well as strong run-ups like we had in summer of 2008. I'd like to see more discussions like this on this site -- having money helps our ability to prep - regardless of our forecast for society.

1). Having investments that do well when oil prices rise meaningfully is an excellent hedge to the inflation in the cost of living that rise will bring over time. Having enough such investments can negate such inflation impacting your middle-class lifestyle.

2). You can use well run mutual funds that invest in a well diversified pool of energy stocks with an emphasis on oil. You can dollar cost average (DCA) into such funds month after month, year after year. That way you ensure you buy below the average price. You can increase your investments when oil prices crash (like in early 2009), and you can lighten up if oil prices zoom wildly and your position suddenly garners a huge unexpected profit (like in summer 2008).

3). Example -- I've been doing this for about 15 years in PRNEX T. Rowe Price New Era. Good natural resource fund, heavy into all sorts of oil companies, but also holding things like miners, some NG, some timber, etc. Sold about 2/3rds of my position near the top (high $60's a share) in summer of 2008 (better lucky than smart) in a couple of chunks. Aggressively (and gleefully) DCA'd back in below $30 as oil crashed with the economy, to rapidly rebuild my share count. With my forecast for oil to rise steadily over next 10-15 years (ON AVERAGE OVER TIME) mostly due to increasing third world demand, continue (less aggressively) to DCA back in around $50 a share.

4). When the price dips, or when one doesn't want the price to rise short term or too much, one can use options as a derivative position to enhance long term returns. I have been gleefully selling ***SMALL*** short term PUT option positions below the DIG price since late 2008. Most of the time, I just keep the money. Occasionally I buy the options back cheap and sell another set at a lower strike. Two things can happen when you do this:

a). The oil price goes down, and you build a DIG position at lower prices. As long as you do this slowly, and you want the price to go down so you can DCA into your fund position at MUCH lower prices over time, this is fine. When this happens to me, I'm patient and end up selling the DIG stock once it recovers, by sellling calls on it once it becomes profitable enough. At that point I'm selling both calls and puts on DIG, and one of those positions WILL expire worthless.

b). The price of oil doesn't go down, and you just collect the option premiums. I look at this as lowering my overall DCA cost of the PRNEX shares I buy.

***SMALL*** means small relative to your overall oil fund position. This lets you average down all the way.

5). Naturally, you have to decide what is "high" and what is "low". For both your fund shares, and especially if you want to sell related options for income and to bait the price of oil down. There is no science to this. I don't read charts. I just look at the overall global economy, and news about oil supply, demand, and general energy technology and make my best guesses. For my timeframe, thus far, the cycles look like they take years. After all, I waited for about 15 years for the first really big spike to hit in 2008.

As long as you keep your overall position at or below the total percentage of your overall portfolio that you want to invest in oil/resources, this should work fine. Getting greedy and running out of money (being your own worst enemy) is the biggest risk here.

Finally, longer term, IF green tech actually starts to make meaningful impacts on energy consumption globally, and especially if that accelerates rapidly -- then that could decrease oil's long term price outlook considerably IMO. I would be surprised if that becomes a meaningful risk before 10 or 15 years out given third world growth in demand (cornies will disagree), but it bears watching.

What does one do if/when that becomes likely? Not sure, but IF the trend will be to carpet the world in a huge heavy duty electrical grid to carry all the green electricity, one would think that would take lots of copper. FCX has been a great global copper producer which also produces a meaningful amount of gold. Sadly that's gone way up, but the option premiums on FCX over time are huge...

Oh, and if tomorrow someone invents "Mr Fusion" that runs on garbage, and oil and resources suddenly go to 10% of their current prices -- then you get HURT. Sorry - there is no risk free way to invest in commodities.

[vtsnowedin]

Oil demand will plummet? What do you base this on?

Oil is not something that most of us CHOOSE to use. It is a necessity of life. We need it to heat our homes and drive our cars to work. What do you base your statement on? Could you please post a link that backs up your claim? (I'm guessing not)

Wrong on both counts. You can walk to work and you soon will. That may mean moving closer to your work or changing jobs but one way or the other you will stop driving a car to and from work. You do not need to heat your home, at least not all 2000 square feet of it. You need to heat the water pipes and drains so they don't freeze and burst and the area of your bed needs to be warm enough so you can sleep comfortable without too many quilts on top of you. The rest of the air in a house can be unheated if people would just put on some wool clothes. Spending your days dressed like a ski bunny or a Yankee farmer while indoors may seem silly today but let heating oil get to $10 /gallon and you will find it has it's charms.
We use and waste oil today only because it is cheap and easy to use. Let that change and we will change or freeze to death in the dark. I'm betting on change.

[Asterisk]

I dare say few, if any, people who post on this site actually "work" for a living, as in expend energy, manage the expenditure of energy, create energy etc. I.E. What used to be called "work."

Therefore, when shortages occur and the price of petroleum increases then all the superfluous tasks we have come to call "work" will disappear. Perhaps rapidly. Then there will be lots of folks milling around with little to do. How does one get RICH in this circumstance?

--I would imagine hoarding old sneakers or bras in a well-fortified abandoned brick or stone building might be a first step.
--All those old bras and sneakers would need a cleaning before sales. One might put together an industrial cleaning service. As few people will own or have the money to operate their own washing machines. Find an abandoned prison and strip the prison laundry room of its machinery.
--Then of course those old sneakers and bras will need constant repair and updates. There's a job. America's first modern sweat shop Think they won't be coming back from China????? Think again!
--Finally when the old sneakers and bras wear out completely they can be recycled into a felt-like material. They are shredded and pressed together under heat to make a mat. The Three R's in Action. Reuse, Recycle, and Reality! Think of the opportunities. Patagonia Sneaker/Bra Climbing/Snowboarding Apparel. Sneaker/Bra Skins for dead Iphones

Dude, that's awesome! Why didn't I think of that...I'm off to go find some bra's!

[Asterisk]

Wrong on both counts. You can walk to work and you soon will. That may mean moving closer to your work or changing jobs but one way or the other you will stop driving a car to and from work. You do not need to heat your home, at least not all 2000 square feet of it.

Well considering that I make my living teaching at a school during the day and then teaching 20 private cello students at night, I'm I could walk to a school near me for a day job, but private cello instruction will probably not be in high demand when people are hoping to find food for dinner!

As for heating, if....and I do say if....I stay in Miami, the problem will be staying cool in our blisteringly hot summers. Especially with global warming beginning to kick into high gear. Hell, what am I talking about...I need to get the hell out of Miami! haha (seriously!)

[Asterisk]

To try to help, I will discuss oil related INVESTMENT ideas here a bit. I am talking about a, say, (at least) 5 to 15 year strategy which can withstand crashes in the global economy and oil prices, as well as strong run-ups like we had in summer of 2008. I'd like to see more discussions like this on this site -- having money helps our ability to prep - regardless of our forecast for society.

Thanks for your thoughtful post Oucast! I'm going to probably have to read through it another 4 or 5 times to understand exactly what you are saying, but I will do that because you really seem to know your stuff! Wow!

I might even print out your post and take it to a local investment agent that I have used in the past and ask him to translate for me!

[davep]

I've already got some calls on crude for 2013, and intend to get some more for 2015, 2017 etc. Some can be really silly (e.g. 500 dollars) but they're very cheap. Others are more expensive (e.g. 150/200 dollars) but also worth a punt.

If you have spare cash and no debts, this longer-term leveraged approach is bound to make serious money at some point, unless the Government suddenly outlaws private individuals from speculating on the oil futures options markets. I can see it now "It's the fault of these speculators, let's do something about it..."

[Ibon]

Complimenting davep's post and also Outcast-searcher here is a podcast for you to all listen through. it will review the following ways to invest if you have a conviction, that inspite of demand destruction and cycles, the price of oil will rise:

Oil equity stocks
OIl ETF's
Oil Futures
Oil Futures with options

It is really worth listening to this. It also mirrors what I am doing with a significant part of my net worth.

http://www.financialsense.com/financial ... he-century

[mattduke]

Putting it all into physical silver bullion in your possession would be a reasonable choice that will serve you well during the period before the oil crisis and after. If you want to play the pre-oil crunch dollar crash you can get into the miners with ETF's like GDXJ and SIL. You can short treasuries with TBT. One can imagine a scenario where as EROEI drops off that oil companies will fail even as the oil price skyrockets. In that situation a direct oil-price tracking ETF like USO would make sense. But when things get that bad, relying upon the wall street financial system starts to seem risky. Which brings us back to physical bullion in your home.

[Ibon]

You have to hedge all this advice against the improbable but not impossible scenario that governments and central banks around the globe see the potential for such destabilizing gyrations due to currency and energy markets that out of their own self interest they actually do sit down together and take such draconian action as oil price fixing and rationing, currency stabilization, etc.

Or a Tea Part type majority that wins elections, overpowers the FED, stops quantitative easing and plunges the economy into a deflation where commodities tank and the recession runs so deep that demand destruction kills again oil price.

Or that against all logic and odds we go for one last illusionary bubble where confidence returns and the dream goes on. commodities could tank but energy soar.

always allow opposite scripts to play out as devils advocate from the one you believe in and invest in puts and hedges accordingly.

The nature of volatile times dictates you don't put all your eggs in one investment strategy.