4 Ways to Fight "Oil-flation"

By Don Miller

Want to know what the price of a barrel of oil will be in eight years?

Exactly $119.50 a barrel.

There’s no shortage of pundits predicting where oil prices are heading. And every day seems to bring new reasons to change the forecast - a resurgent dollar, Americans curtailing their driving habits, oil supply reports - the list goes on.

But the guys who really know the future of oil prices are those sitting right in the driver’s seat – oil producers.

Every day, they make bets about the direction of petro prices on the futures market. And right now, they’re telling you – in no uncertain terms – oil’s got a floor price of $100 a barrel for years to come.

“Oil-flation” is here to stay, but this report reveals four ways you can beat it starting now…

The Future Price of Oil – And Why You Don’t Need a Crystal Ball

Crude oil is the world’s most actively traded commodity. Every day, oil producers trade futures contracts on the New York Mercantile Exchange to hedge against price swings.

At the end of the day, they – along with speculators who bring liquidity to the market – determine the price of oil, which is simply a reflection of the market’s attempt to balance supply and demand.

So, that prediction of $119.50 a barrel? That’s a recent closing price on NYMEX for the December 2016 contract.

Fact is, NYMEX has over 1,000,000 active futures contracts or “open interest” on crude oil for the next eight years and not one trades below $112 a barrel.

That means the guys in the business – the ones who make their living producing and selling oil – are predicting oil will be priced over $112 a barrel for most of the next decade.

Why are they predicting the continuation of triple digit oil prices?

Plain and simple, the markets are telling us future demand for oil will outstrip supplies.

Demand for Oil Keeps Growing

Although demand is highest in the developed world, exploding economies like China and India are quickly becoming large oil consumers.

The United States is still the world’s largest consumer of petroleum and our thirst for oil is growing rapidly. Between 1995 and 2005, U.S. consumption grew from 17.7 million barrels per day (bpd) to 20.7 million bpd – a 17% increase.

In the same time frame, China’s consumption vaulted from 3.4 million bpd to 7 million bpd – a 106% increase. And that number’s rising, as China surpassed 8 million bpd for the first time in June.

Meanwhile, India’s oil imports are expected to more than triple from 2005 levels by 2020, rising to 5 million bpd.

All totaled, Asia accounts for 60% of the world’s new oil demand.

Putting a worldwide number on it, the International Energy Association recently increased its 2009 oil demand forecast to 87.8 million barrels a day.

On top of that, The U.S. Energy Information Administration projects world consumption of oil to increase to 98.3 million bpd in 2015 and 118 million bpd in 2030. That’s a 35% increase by 2030.

Oil Production Dropping?

By now, you’ve probably heard of the Peak Oil theory – that worldwide oil production has peaked and is now dropping. Consider:

• The U.S. Energy Information Administration Energy contends that world production leveled out in 2004, and reached a peak in the third quarter of 2006. 
• Oil tycoon T. Boone Pickens recently told Congress, “I believe you have peaked out at 85 million bpd globally.”
• And at a recent industry conference, the chief executive officer of Total SA (TOT), the French oil major, said the industry would be lucky to produce 95 million bpd by 2020.

But whether you believe Peak Oil is true or not, at least nine of the largest 21 oil fields on the planet are in decline.

In 2006, a Saudi Aramco spokesman admitted that its mature fields are declining 8% per year. It’s now clear that Ghawar, the largest oil field in the world, has peaked.

The second largest, the Burgan field in Kuwait, started down in 2005. And Mexico announced that its giant Cantarell Field entered depletion in 2006.

Reserves Don’t Equal Production

Then there’s the matter of oil reserves, a moving target if there ever was one.

You see, oil reserves are classified three ways: proven, probable and possible. Proven reserves have at least 90% to 95% certainty of entering production. Probable reserves have 50% probability. And possible reserves have a 5% to 10% chance.

A 2007 report by the Energy Watch Group pegged total world proven plus probable reserves at between 850 and 1,250 billion barrels. That’s 30 to 40 years of supply if demand holds steady – which it won’t.

But as Sadad I. Al Husseini, a former VP of Aramco, said in October 2007, “Reserves are confused and inflated. Many of the so-called reserves are in fact speculative. They’re not delineated, they’re not accessible, they’re not available for production.”

By Al-Husseini’s estimate, 300 billion of the world’s proven reserves should be re-categorized as speculative.

On top of that, about 70 oil-producing nations don’t reduce their reserves to account for yearly production. As noted investor Jim Rogers says, “Despite consistently pumping 8 million bpd for over two decades, Saudi Arabia has repeatedly stated their reserves are at 267 billion barrels.”

Organization of Petroleum Exporting Countries [OPEC] member nations even have economic incentives to exaggerate their reserves, as the OPEC quota system allows greater output for countries with bigger reserves.

The reality is this: it’s highly likely we have a lot less than 1,200 billion barrels to burn in the next 30 to 40 years.

And increasing demand could have us running on fumes in an even shorter span.

New Production — a Pipe Dream?

Even though we continue to hear about new oil discoveries, new oil reserves will be harder to find and extract.

Take Kazakhstan, for instance. Its oil fields are slated to be the third largest in the world. The heralded Kashagan field should produce 1.5 million bpd at its peak. But technical problems continue to plague the project.

In 2005, production was scheduled to start in 2009. A year ago that was moved to 2011 and now it’s been pushed back to 2013. And the projected cost has risen to a whopping $50 billion.

Canada’s oil sands are another example. Production could reach 5 million bpd by 2030 in a “crash program,” but the oil contains contaminants such as sulfur and carbon that are difficult to extract and leave highly toxic tailings.

Frankly, the most easy-to-extract oil has been found. Price increases have led to exploration where high technology is required and where it is much more expensive to extract the oil.

We are replacing OPEC oil that costs $3 per barrel to produce with deep-water and other nonconventional sources at $60 per barrel and up.

And that’s why the markets are predicting triple digit oil prices are here to stay.

Four Ways to Play “Oil-Flation”

Here’s a four-prong strategy to help you ride the oil bull market into the future and get your share of the profits.

Lehman Brothers Holdings Inc. predicts that oil producers will spend a record $369 billion on energy projects this year. With oil prices still in record territory, oil companies are drilling wells in waters previously considered cost-prohibitive. And with President Bush calling for the reopening of offshore drilling, look for the trend to accelerate.

Money Morning Investment Director Keith Fitz-Gerald recommends StatoilHydro ASA (STO), an integrated oil company headquartered in Norway. The company is now the world’s largest energy operator in waters more than 100 meters deep and produces, on average, 1.7 million barrels of oil equivalent per day.

It has proven reserves of more than 6 billion barrels of oil, has operations in 34 countries, and is expanding aggressively to diversify internationally.

You might also look at Transocean Inc. (RIG), the world’s largest provider of offshore drilling services for oil and gas wells. Its fleet includes ultra-deepwater and harsh environment semisubmersibles, and drill ships.

In November, Transocean merged with GlobalSantaFe, combining the world’s No. 1 and No. 2 offshore drilling companies. The company now owns 138 offshore rigs, twice the number of its nearest competitor.

It also just signed a $1.69 billion agreement with Petrobras (PZE), Brazil’s government-sponsored oil company to provide rigs for its newly discovered Tupi field. With over 40 billion barrels in reserves – three times the size of Alaska’s Prudoe Bay field – Tupi could be a bonanza for both companies.

Another way to capitalize is buying companies that outfit drilling rigs with pipe, fittings, and provide oil-exploration and field-management services. National Oilwell Varco (NOV) is the “picks and shovels” play in the oil services industry, with the lion’s share – over 60% - of the market for rig gear.

The company’s huge product line is found on about 90% of all drilling rigs. It’s been growing revenues at almost 40% for the past three years while increasing earnings per share by a whopping 68%.

And don’t ignore the burgeoning alternative energy field. Both Sens. Obama and McCain are pledging over $150 billion in renewable and alternative energy initiatives during the next decade.

As Fitz-Gerald likes to say, “alternative energy is an alternative no longer.” Vestas Wind Systems (VWDRY.PK) is the world leader with over 35,000 wind turbines installed in 63 countries. It is the industry leader in wind technology with 23% of the market worldwide, and a full 85% share of the market for turbines with a capacity of 2 megawatts and higher.

Be cautious with this one as its stock is up over 300% in the last 18 months. But with a surging government investment climate in alternative energy in the U.S., the company should continue to benefit.

Original post

Comments

[David Martin:]

An excellent article. Oil supplies may be even tighter than indicated though, as there is another area of growth in use not mentioned - the oil exporters.
Saudi Arabia, Russia and other oil exporters are increasing their own oil use very rapidly, Which leaves less and less available for export.
The geologist Jeffrey Brown calls this the 'Export Land Model'
From around 2012 on this means that oil supplies available to the oil importers will likely be decreasing by around 6% a year.
This model is robust, and can be arrived at using many different methodologies.
Increasing amounts of natural gas are also going to be consumed to beneficiate the progressively heavier and more sour crudes that remain, and LNG supplies are already projected far lower than previous estimates, by 100 million tons by 2013, around the annual consumption of Japan and Korea combined.

2008 Sep 03 09:01 AM

[Yael Pipano:]

NYT article disagrees:
August 27, 2008
The Energy Challenge
Wind Energy Bumps Into Power Grid’s Limits
By MATTHEW L. WALD

When the builders of the Maple Ridge Wind farm spent $320 million to put nearly 200 wind turbines in upstate New York, the idea was to get paid for producing electricity. But at times, regional electric lines have been so congested that Maple Ridge has been forced to shut down even with a brisk wind blowing.

That is a symptom of a broad national problem. Expansive dreams about renewable energy, like Al Gore’s hope of replacing all fossil fuels in a decade, are bumping up against the reality of a power grid that cannot handle the new demands.

The dirty secret of clean energy is that while generating it is getting easier, moving it to market is not.

The grid today, according to experts, is a system conceived 100 years ago to let utilities prop each other up, reducing blackouts and sharing power in small regions. It resembles a network of streets, avenues and country roads.

“We need an interstate transmission superhighway system,” said Suedeen G. Kelly, a member of the Federal Energy Regulatory Commission.

While the United States today gets barely 1 percent of its electricity from wind turbines, many experts are starting to think that figure could hit 20 percent.

Achieving that would require moving large amounts of power over long distances, from the windy, lightly populated plains in the middle of the country to the coasts where many people live. Builders are also contemplating immense solar-power stations in the nation’s deserts that would pose the same transmission problems.

The grid’s limitations are putting a damper on such projects already. Gabriel Alonso, chief development officer of Horizon Wind Energy, the company that operates Maple Ridge, said that in parts of Wyoming, a turbine could make 50 percent more electricity than the identical model built in New York or Texas.

“The windiest sites have not been built, because there is no way to move that electricity from there to the load centers,” he said.

The basic problem is that many transmission lines, and the connections between them, are simply too small for the amount of power companies would like to squeeze through them. The difficulty is most acute for long-distance transmission, but shows up at times even over distances of a few hundred miles.

Transmission lines carrying power away from the Maple Ridge farm, near Lowville, N.Y., have sometimes become so congested that the company’s only choice is to shut down — or pay fees for the privilege of continuing to pump power into the lines.

Politicians in Washington have long known about the grid’s limitations but have made scant headway in solving them. They are reluctant to trample the prerogatives of state governments, which have traditionally exercised authority over the grid and have little incentive to push improvements that would benefit neighboring states.

In Texas, T. Boone Pickens, the oilman building the world’s largest wind farm, plans to tackle the grid problem by using a right of way he is developing for water pipelines for a 250-mile transmission line from the Panhandle to the Dallas market. He has testified in Congress that Texas policy is especially favorable for such a project and that other wind developers cannot be expected to match his efforts.

“If you want to do it on a national scale, where the transmission line distances will be much longer, and utility regulations are different, Congress must act,” he said on Capitol Hill.

Enthusiasm for wind energy is running at fever pitch these days, with bold plans on the drawing boards, like Mayor Michael Bloomberg’s notion of dotting New York City with turbines. Companies are even reviving ideas of storing wind-generated energy using compressed air or spinning flywheels.

Yet experts say that without a solution to the grid problem, effective use of wind power on a wide scale is likely to remain a dream.

The power grid is balkanized, with about 200,000 miles of power lines divided among 500 owners. Big transmission upgrades often involve multiple companies, many state governments and numerous permits. Every addition to the grid provokes fights with property owners.

These barriers mean that electrical generation is growing four times faster than transmission, according to federal figures.

In a 2005 energy law, Congress gave the Energy Department the authority to step in to approve transmission if states refused to act. The department designated two areas, one in the Middle Atlantic States and one in the Southwest, as national priorities where it might do so; 14 United States senators then signed a letter saying the department was being too aggressive.

Energy Department leaders say that, however understandable the local concerns, they are getting in the way. “Modernizing the electric infrastructure is an urgent national problem, and one we all share,” said Kevin M. Kolevar, assistant secretary for electricity delivery and energy reliability, in a speech last year.

Unlike answers to many of the nation’s energy problems, improvements to the grid would require no new technology. An Energy Department plan to source 20 percent of the nation’s electricity from wind calls for a high-voltage backbone spanning the country that would be similar to 2,100 miles of lines already operated by a company called American Electric Power.

The cost would be high, $60 billion or more, but in theory could be spread across many years and tens of millions of electrical customers. However, in most states, rules used by public service commissions to evaluate transmission investments discourage multistate projects of this sort. In some states with low electric rates, elected officials fear that new lines will simply export their cheap power and drive rates up.

Without a clear way of recovering the costs and earning a profit, and with little leadership on the issue from the federal government, no company or organization has offered to fight the political battles necessary to get such a transmission backbone built.

Texas and California have recently made some progress in building transmission lines for wind power, but nationally, the problem seems likely to get worse. Today, New York State has about 1,500 megawatts of wind capacity. A megawatt is an instantaneous measure of power. A large Wal-Mart draws about one megawatt. The state is planning for an additional 8,000 megawatts of capacity.

But those turbines will need to go in remote, windy areas that are far off the beaten path, electrically speaking, and it is not clear enough transmission capacity will be developed. Save for two underwater connections to Long Island, New York State has not built a major new power line in 20 years.

A handful of states like California that have set aggressive goals for renewable energy are being forced to deal with the issue, since the goals cannot be met without additional power lines.

But Bill Richardson, the governor of New Mexico and a former energy secretary under President Bill Clinton, contends that these piecemeal efforts are not enough to tap the nation’s potential for renewable energy.

Wind advocates say that just two of the windiest states, North Dakota and South Dakota, could in principle generate half the nation’s electricity from turbines. But the way the national grid is configured, half the country would have to move to the Dakotas in order to use the power.

“We still have a third-world grid,” Mr. Richardson said, repeating a comment he has made several times. “With the federal government not investing, not setting good regulatory mechanisms, and basically taking a back seat on everything except drilling and fossil fuels, the grid has not been modernized, especially for wind energy.”

2008 Sep 03 10:33 AM

[biomedlives:]

I second "an excellent article." One correction is in order - carbon and hydrogen are the elements in hydrocarbons, so carbon is not a contaminant in oil from oil sands.

2008 Sep 03 11:33 AM

[Yael Pipano:]

Today's WSJ is very PRO wind power and would support investments in the sector, see below:
Wind Power May Gain Footing
Off Coast of U.S.
Federal Government
Prepares to Lease
Tracts for Turbines
By JEFFREY BALL
September 3, 2008; Page A4

Amid a national debate over offshore oil drilling, the federal government is preparing to unleash development of another offshore energy source: wind.

The Interior Department, the agency that handles oil-and-gas leases in U.S. waters, is preparing to lease swaths of the outer continental shelf to companies that want to erect massive wind turbines. With the public-comment period for the proposal scheduled to end Monday, competition is heating up to develop wind projects on the shelf, the same underwater formation largely covered by an oil-drilling ban that has become a contentious issue in the presidential race.

The federal program signals the start of a broad push to develop offshore wind energy in the U.S. The country often is dubbed by renewable-energy experts as "the Saudi Arabia of wind" because of its vast, windy expanses, particularly in the Western plains. Now, rising interest in renewable energy is spurring exploration of the ocean, where the winds typically are heavier but the technological hurdles to tapping it are higher. That shift mirrors the oil industry's move to offshore wells decades ago.

The offshore-wind race is centered on the Northeast. In June, an electricity producer and a wind-energy developer in Delaware signed a contract for a project of some 67 turbines to be built about 11.5 miles off the state's coast. Over the next two months, Rhode Island and New Jersey are expected to choose wind-energy developers to work with as the states try to put together offshore projects.

And New York City officials are talking with wind-power developers about erecting turbines on a massive tract of the Atlantic Ocean about 25 miles from Manhattan. Offshore wind power seems likely to be the largest source of renewable energy for the city, says James Gallagher, senior vice president for energy policy for the New York Economic Development Corp. The idea is part of a broader plan by New York Mayor Michael Bloomberg to curb the growth in the city's demand for fossil-fueled energy.

The New York City plan also envisions installing smaller wind turbines atop buildings. But Mr. Gallagher says offshore wind provides a far bigger potential energy source.

These projects would require leasing ocean territory through the Interior Department, because they would be far enough out from the shore that they would sit in federal waters. Industry officials expect it would be three to five years before the first turbines were installed.

The Interior Department's Minerals Management Service expects to finalize its proposed rule governing leasing of offshore acreage for alternative-energy production by the end of the year, clearing the way for development to start soon after. Already, the agency is doing environmental analyses on 10 offshore parcels that it is considering leasing this fall for wind projects. If the agency approves the leases, companies could begin exploring the areas for possible wind-turbine sites.

Wind power is booming in the U.S. That is because of rising fossil-fuel prices, federal renewable-energy tax breaks and mounting opposition to new coal-fired power plants that emit greenhouse gases. Last year, 35% of the electricity-generation capacity added in the U.S. was from wind -- a percentage second only to natural gas, according to the American Wind Energy Association, a trade group.

But wind accounts for only about 1% of total electricity generated in the U.S. And so far, all the wind power in the U.S. is produced onshore. The states that crank out the most -- Texas, followed by California -- boast vast stretches where the wind blows hard and where there is enough land to install hundreds of turbines to catch it.

But the onshore wind industry in the U.S. is beginning to be hampered by a lack of electrical-grid capacity to carry the power from the isolated places where wind typically blows hardest to the population centers that need the juice. Offshore wind provides a potentially big source of energy close to major coastal cities.

That explains why roughly two dozen offshore wind projects are operating in Europe, a place with comparatively little open land. The Northeastern U.S., with similar land constraints, is starting to follow suit.

Big obstacles remain. Wind power is more expensive than fossil-fueled energy. In the U.S., the tax breaks necessary to make it competitive are due to expire Dec. 31. Several proposals to renew the wind-power tax breaks have failed to pass Congress, typically because the bills also included controversial measures to remove existing tax breaks for other industries, notably oil producers. Whether Congress will resolve the dispute and extend the wind-power tax breaks when it returns from its recess is unclear. In the past, it has let the tax credits expire three times, prompting a lull in wind-power construction until the credits later were renewed.

If offshore wind power can fly in the U.S., industry experts say, it is likely to take off in the Northeast. The region has high electricity prices, making it easier for wind-power developers to turn a profit. It has large coastal cities thirsty for more juice. And its offshore territory offers some of the strongest wind in the U.S.

In addition, the outer continental shelf extends out from the Northeast at shallow depths for long distances -- in contrast to the West Coast, where the shelf drops off quickly to great depths. Putting a wind turbine in shallow water is easier and less costly than putting one in deeper water.

And putting wind turbines far out from the coast could assuage opposition from coastal residents who don't want their seaside views obscured -- an issue the oil industry is also facing. Some proposed offshore wind projects have sparked significant opposition, notably one off Cape Cod.

Bluewater Wind, a Hoboken, N.J., company recently bought by Australia's Babcock & Brown Ltd., won the bid to develop the project off Delaware. It is waiting to hear, probably in the next month, whether it won the bid in Rhode Island and is among the companies talking with New York City.

2008 Sep 03 06:09 PM

[AKell:]

I don't buy into the whole myth that rising consumption and less production is enough to cause the steepness in current oil prices. I can agree with the author's prediction of oil prices remaining in triple digits but not with his explanation.
There is no doubt that demand has risen and is rising both in the US and of course in the Far East. This clearly has an effect on the global energy markets, but not the drastic result described in the article. The author correctly points out that world demand and especially the rise of demand in the US and China began already in 1995. I would like to point out that the steep rise in oil prices really began only in 2003-2004. Before that, the price had risen (due to rising consumption) but the high demand is not enough to explain the triple digit prices (as least as of yet).
The major factor in the creation of current oil prices is the new found cooperation between Russia and OPEC. Russia (post USSR) is one of the top producers in the world that only saw the fruits of foreign investment in the late '90's. Around the turn of the century, Russia, who was not on good relations with many OPEC nations, was able to compete in OPEC markets and keep the prices stable if not low. In 2003, for a variety of external and internal factors, Russia and OPEC began to cooperate and work together. The minute they set common goals of high prices, they encountered no opposition, and no competition.
That is the reason for high prices, and unless their relationship changes, prices will remain high, NOT because of rising demand.

2008 Sep 04 07:24 AM

[lizardop:]

Swimjames, today's WSJ says it all: Wind power is clearly not reducing the dependence on imported fuel, the experience from Germany and Spain shows that it is increasing the dependence of imported natural gas. Increasing the dependence of IMPORTED NATURAL GAS!!! I wonder if this means liquified natural gas (LNG). Please see article below FYI: BUSINESS EUROPE

Wind Fuels Gas
By EDGAR GÄRTNER
September 11, 2008

Following Russia's invasion of Georgia, a vital link between Europe and the energy resources of Central Asia, energy security is back at the top of Europe's agenda. For years now, many Europeans thought that a major part of their future energy security might come from wind turbines and solar panels. Industry, too, has suggested that this may be the case: At this summer's World Petroleum Congress in Madrid, most major oil and gas companies presented new plans for big renewable energy projects. But this renewables push, particularly when it comes to wind, is probably just a very clever short-term business strategy that will not improve Europe's geopolitical situation.

Wind turbines generate electricity very irregularly, because the wind itself is inconsistent. Therefore wind turbines always need backup power from fossil fuels to keep the electricity grid in balance. Gas turbines are the best way to do this. They are able to respond quickly and push power production when wind generators stop suddenly. They can be turned on and off almost instantly, whereas traditional coal-fired plants need to be maintained in a very inefficient standby mode if they are to respond to large fluctuations in power demand.

A proliferation of windmills, then, can become a windfall for gas sellers. Just look at the cases of Spain and Germany, Europe's leading producers of wind power.

By the end of 2007 Spain had 14,700 megawatts (MW) of installed wind capacity, according to Enagás, which manages the national gas network, producing 8.7% of the country's total power supplies. Most of these wind generators are located in scarcely populated areas, while the power consumption is concentrated in big cities with their many air-conditioned buildings. The peak load of the Spanish power grid is thus in the hot summer months—but this is precisely the time of year when there usually isn't much wind.

For this reason, more and more gas turbines are being installed near consumers in the suburbs of Spain's cities. Only last year, Spanish power providers added 6,400 MW of gas-turbine power capacity, taking the total installed capacity of gas turbines to 21,000 MW. Natural gas has become the main source of electricity generation in Spain, and according to Enagás, 99.8% of the gas used in Spain is imported. Most of this comes via pipeline from Algeria, but the import of liquid natural gas (LNG) by ships will increase.

In Germany, more than 20,000 wind turbines with a total capacity of 21,400 MW are now "embellishing" landscapes. Wind power's share of total electricity generation has risen in line with that of natural gas since 1990. Germany's gas consumption for power generation more than doubled between 1990 and 2007, and now represents 11.7% of the country's total power generation. The country imported 83% of its natural gas supplies.

Today part of the wind power backup in Germany is still done by old coal-fired plants. But the Greens and even parts of the governing Christian and Social Democratic parties are fervently opposed to the construction of new coal plants. So many old power stations will probably be replaced by gas turbines. The green opponents of new coal-fired plants are nowadays the most dependable allies of the big gas companies such as Gazprom, Shell or BP.

Most European countries force consumers to subsidize electricity from wind power. This makes "renewables" a very safe investment compared with other energy businesses, where swings in commodity prices can be large. As Europe's big integrated oil and gas companies—such as Shell, BP and Total—invest more and more in LNG, they are also lobbying hard for a world-wide carbon-emissions trading system that would further increase the advantage of gas over coal.

In the U.S. the same thing is happening. The problem for the natural gas industry in the U.S. is that gas is still relatively inexpensive compared with market prices elsewhere in the world. There are no facilities for LNG export. This may explain why Shell, BP, Chevron and T. Boone Pickens are investing in wind power. It's a clever strategy to add value to their gas assets by boosting demand.

These gas players can afford to lose money on wind power in the short term to reap huge profits in the long term. In fact, this was the strategy first implemented by Ken Lay of Enron in 1990s. Enron was the power and gas company that started the first large-scale manufacturing of wind power in the U.S. It also brought up the ideas for a cap-and-trade system, to increase the competitive edge of gas over coal.

Wind power is clearly not reducing the dependence on imported fuel, contrary to the frequent claims of its proponents. In fact the experience from Germany and Spain shows that it is increasing the dependence of imported natural gas. And that's not energy security.

Mr. Gärtner is a specialized writer on energy and chemicals issues based in Frankfurt.

See all of today's editorials and op-eds, plus video commentary, on Opinion Journal.

2008 Sep 11 05:30 PM

[einstein p ...:]

I have no idea where the price of oil will be in one year. I had to hock my crystal ball thanks to the hedge funds.

When I started investing in oil and oil service companies, it was 10 bucks a barrel --- which wasn't all that long ago. The fact that we now accept 80-100 dollars a barrel as "cheap" is almost laughable.

Where will NOV be in the next year? Much higher. The fact that this company is trading in the low fifties is an amazing opportunity to buy the best bet on the drilling boom that will occur, regardless of the next election. I'm a buyer. Right here, right now.

2008 Sep 11 09:18 PM