QUOTE (stephen @ Apr 17 2010, 05:55 PM) Good article on the price of oil in 5 years. This sounds hopefull for anyone who owns in northern Alberta
http://www.guardian.co.uk/business/2010/ap...oduction-supply
The problem about peak oil lies in semantics. One camp states that oil reserves have been produced to such a significant degree and that the finding of new oil reserves more and more difficult so that the oil supply no longer can keep up with demand. In fact, the amount of oil that the world is capable of producing, according to this theory, has peaked and from now on we need other sources of energy to meet demand.
The other side of the debate states, yes cheap oil is peaking but... with higher oil prices we can go after poorer reservoirs and apply very expensive recovery technologies such as SAGD and heel-to-toe fireflooding and polymer floods, multistage frac`ing etc. But as long as we`re willing to pay the price, we will never run out of oil.
Both sides see the same elephant. In fact both sides predict that supply can not keep up with demand and that oil will become increasingly expensive. This is good for Canada and Alberta because we got a lot of crappy oil (reservoirs).
But it also mains that the world will have to pay more and more for oil which restricts economic growth. The good news is that we also have gas. And recent technological progress has made gas, even in crappy reservoirs, easier and cheaper to produce than conventional gas. Hence, the current low gas prices. But this will change as well. When over time, we will convert our oil and coal burning factories and power plants to cheaper and cleaner gas, the demand and price for gas will rise again. Probably to a 6 or 10 to one ratio with oi pricesl. That means based on current oil prices, that natural gas prices should be around 8 to 10 dollars per mcf rather than the current $ 4.0.
That is why I predicted in another posting that investing in gas producing companies will be the `deal of the decade`. The real question though is, when will the turn-around happen. My guess is within 5 years but it could be a lot longer. There are many factors involved. So, it is kind of speculative. Rather than buying pure gas producers, it maybe more prudents to buy an diversified oil & gas company. The company will make money from the current and hopefully future favorable oil prices and benefit from future gas price increases.
Buying a pure gas company may result in value increases, but what if it doesn`t happen or it takes 10 years. The risk is a lot higher then when buying a diversified oil & gas company.
Another way of playing the oil and gas game is by investing in Alberta real estate and betting on a growing economy strongly linked to the oil and gas industry. A good bet, but not sure either.
