Tuesday March 21, 2006

On Peak Oil investing

energybulletin.net -> energybulletin.net :

In a recent missive, Kurt Cobb asked whether Peak Oil investing really mattered in the long run. He says it doesn't, those who say it does don't quite grasp the issue and for the majority it doesn't matter anyway. To all of those three statements, I give a categorical "No". The fact that I and others do say it matters is the point of this post. The statement that we do not quite grasp the issue brings us to the heart of the matter in a post-peak oil world of diminished resources and the means to acquire them. If we are saying that people are going to return to a 1950s or a 1930s or even a 1900s lifestyle, then investments still matter because it also mattered back in those days. Even in the 1900s there was a stock market and there was a bond market. Far less participated in it, but the fact that they existed testified to a recognisable society that got by on a lot less energy.

And will all this matter to the majority whom Kurt Cobb says do not have the time or money to invest in these things? The answer is yes because they are already participating in it. Millions may not hold stocks in energy or any other asset designed to soften a Peak Oil slowdown, but they are more than likely holding such assets in their private and company pension schemes. Energy and related stocks are forming a greater part of the Dow Jones, S&P 500 and any other major international index one cares to mention. Which brings me to my final point. Kurt Cobb says markets are going to drop in value across the board when Peak Oil begins to grind, so what is the point? The point is this, investment determines purchasing power and purchasing power eventually buys the things which in some way contribute to life, liberty and the pursuit of happiness.

There are three choices in the strategy of Peak Oil preparedness. You can either spend all your money now in buying the items you think will help produce the energy you will need in the future. Or you could move that same money into investments which will give leverage towards buying those same items when the effect of Peak Oil becomes clearer. Some will spend now on energy-conservation items but they will also move money away from assets which will wither in a post-Peak Oil world into assets which will increase or maintain purchasing power. After all, capital has to be set aside for contingencies and no-one would willingly let their hard-earned cash stay in assets they know will depreciate rapidly.

So in conclusion, invest now in goods which will decrease energy dependency but also invest in an unwritten future through a diversity of assets which will maintain purchasing power. If anything is certain, it is that money will still exist on the other side of Hubbert's Peak and the various goods and services that it can purchase.

- I consider this significant enough to post it up during office lunch hour. Among the many possible categories of peakoiler types (doomer, soft-lander, etc), I consider myself a moderate, and I am a Peak Oil investor. And I have encouraged others to do the same. Does it matter? Yes, it does. One dollar equals one vote. The money investors put into certain companies supports the efforts of these companies - which, in my case, will include exploring for, and extracting those resources upon which the world economy depends. It also includes companies which are looking into and developing alternative sources of energy. Every dollar I put into the shares of these companies supports the share price at a certain level. So, yes, it does matter.

If nothing else, there's always the "greed appeal". Why buy Google and Apple which have "merely" quadrupled and tripled? Some of the stocks in the energy and resources sector have been rocketing over 1000% - and even so, they *still* remain relatively obscure. Time to start doing your homework? You bet.

(2006-03-21 13:13:56 SGT) [Energy] Permalink

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