76 comments on What Can the Commodity Market Tell Us About Peak Oil?
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76 comments on What Can the Commodity Market Tell Us About Peak Oil?
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In terms of investments, isn't the best safe haven from Peak Oil, uh, oil? There are many Oil and Gas trusts both here and in Canada that will let you buy reserves. An example is Penn West Energy trust (PWE) that has 1P + 2P reserves of 2 bbl/share, with a share going for $31. Yes, they're depleting, but unit holders get the revenues, and Peak Oil awareness is coming faster than the depletion.
Perhaps an even better safe have are trusts heavy in natural gas reserves - natural gas is not up to where its historical ratio vs oil should be, and sooner or later it will revert as peak oil awareness comes.
In a Peak Oil future, the only commodity or asset that counts for anything is oil and its proxies.
Yes I agree. In the UK you can buy rolling futures of Brent and WTI contracts - and of course a stellar array of oil cos. I guess my main point is right now historic precedents may get blown out of the window and I'd prefer invaluable uranium (nu.l) to essentially worthless gold. Gold is a manifestation of greed that consumes vast amounts of energy to produce - and that's it.
Gold is a manifestation of greed that consumes vast amounts of energy to produce - and that's it.
Gold is a manifestation of lack on confidence in paper currency. If peak oil makes it very expensive or difficult to mine gold, then the above ground stock of gold is going to be even more valuable.
I find it amusing that you consider gold intrinsically worthless, while advocating oil company stocks and rolling futures :-)
Gold has been considered valuable for 5000 years, does not rust or corrode, is easy to store, is not affected by fraud, its supply cannot be inflated by central banks and does not fear counter party defaults. The only problem with gold is that it does not pay interest. That is why you can't keep all your money in gold.
What is the intrinsic worth of any stock or future?
Suyog - I was being provocative and serious at the same time.
By a handfull of people from a global population measured in millions for much of the time?
Thinking way into the future - say 2025 - what would you rather own? Land on which you can grow food? Uranium which you can sell to a power company to make electricity from which you can make fertilizer and all sorts of other fuel and power. Or gold, which you can just look at, and hope no one steals? I dare say by then folks may be more inclined to steal your carrots than your gold?
But the point you make about paper rolling futures is well made - who knows what lies behind these SECURITIES - LOL - from the land of Northern Rock - turned to sand in the space of days - which brings us back to gold?
We don't know what the world will look like in 2025.
At least for the next 5 years, gold, gold mining stocks, Canadian oil & natural gas royalty trusts, oil & natural gas company stocks (e.g. Encana), railroad stocks (e.g., BNI) and cash (some combination of US $, Canadian $ & Euros) seems appropriate.
Don't you agree?
Suyog - whilst frequently fishing for tips, I usually try to avoid discussion about investment strategies on TOD. But I don't disagree with what you say here.
Over a year ago I converted many investments to cash and have since distrubuted that cash among several, large banks that are underexposed to mortgagaes and "private equity" deals.
I used to punt on small stocks, but am aware in a downturn they are often hit hardest and so am now focussed on larger companies. I'm also shy of companies that are over exposed to political risks. In the O&G sector I like STL.Ol, ECA.TO and BG.L group. TLW.L is my O&G punting stock - sittting on new discoveries in Ghana and Uganda.
I think JK's rational on gold detailed below is certainly worth considering.
gold aprox $800/ oz.
Oil Aprox $80/barrel
Triuranium octoxide at aprox $80/lb.
Good land 10 acres aprox = $800,000 (where I live)
or 10,000 barrels of oil,
or 1000 lbs of Triuranium octoxide
or 62 lbs gold
"Here jack, I would like to buy your land" .... go figure!
or should we be thinking in terms of cows? Maybe one should start storing cows in their apartment till they have enough cows to buy that land, "Holy sH!t Batman! Look at the pile of manure in this cave". Apres le deluge, gold I think could be Royal. depending on the circumstances.
Not in a major depression. I could see the price of oil (in current dollars) easily dropping by more than 50%. Gold could also do that, but first it needs to achieve its true value, which is at least 4 times the current value.
I own ERF, PWI and PWE. PWI jumped 32% last week when it was bought by a company in Abu Dhabi :-) I can see this happening more and more in the future. As new oil and natural gas finds dwindle, there will be more acquisitions of existing properties by cash rich enterprises. Even if they don't get acquired, I don't see how one can lose by buying oil & natural gas royalty trusts that pay between 10%-14% dividends in Canadian dollars.
Canadian trusts were hurt last year with a change in tax law that will make it much harder to replace their falling reserves with new fields. Personally I like a few US E&P's... IMO producers will not see serious changes in tax laws, and a few of these are expanding reserves. I like gpor (oil) and gmxr (ng). I used to like ard, but the price has risen so much that it is no longer a bargain. Good luck.