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  1. 1,920 Posts.
    Thought this was an interesting read for those investing in alternative energy stocks, CNX/CXY etc;

    Dear Reader,

    Last week, I mentioned a story in the Daily Reckoning that was originally published in the Financial Times. The FT published a leaked draft report from the International Energy Agency. That report (the official version is due on November 12th) reached some shocking conclusions about global oil production.

    First, it said (according to the FT) that global oil production is actually declining at around 9.1% a year. It's much faster than previously thought.

    That may not sound like a lot to you. But did you realise that if that number is correct, the world will produce half as much oil by 2015 as it does today?

    That's just seven years from now...

    What's more, if global oil production continues to decline at that rate, then by 2020 the entire world will be producing just enough oil to meet the daily demand of the world's single biggest user of oil, the United States. Take a look at the chart below to see what I mean.

    The good news in the leaked IEA report-if you can call it good news-is that the world's major oil producers could slow that rate of decline with some much-needed investment. With $556 billion in new oil investment, the IEA says the rate of decline in global oil production can be slowed to 6.4%.

    What does that mean for Aussie investors? Well, $556 billion is a lot of money (even in these days of trillion dollar bailouts). It means that conventional energy producers in Australia-Woodside, Santos, Roc Oil, and BHP-are probably going to do quite well even if the global economy slows down in 2009, as everyone now seems to expect.

    A massive global investment program in oil and gas may turn things around. But I'm quite sceptical that the world will ever produce 100 million barrels of oil per day.

    That doesn't mean there isn't money to be made in energy stocks. They're probably a good punt right now. But I think the big stock market winners-and I'm talking triple digit gains here-from the decline in global oil production are going to be alternative energy companies.

    I know what you must be thinking.

    "You're crazy. Those shares have been absolutely crushed in the last six months. Worse than mining stocks!"

    You're right. But that's exactly my point.

    The alt energy shares HAVE been crushed. Yet as you can see from the IEA data, the case for alternative energy has never been stronger. And you can be sure that whoever is elected President in the U.S. on Tuesday, the entire alt energy sector is likely to see a big boost from government investment in energy.

    Politics aside, if you're a level-headed punter, you know an opportunity when you see it. The crash in Aussie shares is a fact. But as my colleague Kris Sayce believes, this sets you up with the punt of a lifetime -- the chance to make a handful of carefully calculated bets on what will be the next big energy and technology winners of the 21st century.

    Kris has identified five "Bounce-back Belters" he believes must rebound as the oil price rises and the focus goes back on alternative energy. You can read about them by going HERE.


    Dan Denning
    Editor, the Daily Reckoning Australia

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