In one story, the Journal covers a recently released annual report from the International Energy Agency. According to the Journal, the IAE paints a gloomy picture of energy shortages and escalating costs of discovery and recovery.

The IAE says that current low oil prices are an anomaly linked to the economic crisis embracing the world. Eventually, when the economy regains its health, oil prices will continue to climb over the coming years to hit $200 a barrel by 2030.

One problem with energy prices remains a dilapidated infrastructure. In turn, energy companies would have to invest more than $26 trillion by 2030, with over half of that going to increased power generation and distribution. Most of the rest of the investment will go to exploring and developing new sources of oil, the Journal writes.

Underinvestment by the oil industry could be just as responsible as increased global consumption for future price increases. Energy companies will have to spend $350 billion a year on new oil and gas projects through 2030. By comparison, the industry spent a total of $390 billion from 2000 to 2007, said the Journal.

There are two obstacles faced by oil companies when it comes to making these massive investments.

The first is the state of the current economy and shrinking energy consumption. The second is that many oil fields are past their prime, as Peak Oil proponents have been saying for decades. To extract more oil presents a questionable economic argument for new investment.

The IEA asserts, however, that renewable energy sources will grow by over 7% a year – reaching 4% of the world total by 2030, up from 1% in 2006.

That said, the IEA also said the U.S., Europe and Japan will likely never use more oil than they did last year. All projected increases in oil demand will come from the developing world, mainly China, India and the Middle East.

So if in fact the U.S. oil consumption has peaked, does it make sense for our new democratic regime to sink $150 billion over the next decade into creating new jobs for the green sector?

That’s the question asked in the second article in today’s Journal.

This piece challenges the wisdom of creating government-subsidized green jobs, at a time when the jury is still out about the economics of green energy.

President-elect Obama maintains that spending $150 billion over the next decade to boost energy efficiency would help create five million jobs, according to the Journal.

But the article goes on to say that these numbers are under assault by another contingent in the Obama camp.

As the Journal writes, several studies estimate that $1 invested in renewable energy or energy efficiency would yield up to four times as many jobs as $1 invested in oil and gas, whose basic infrastructure of wells, refineries and pipelines has been around for years. Moreover, those studies say, clean-energy jobs are likely to be centered in the U.S., unlike jobs in the oil and gas industry, which increasingly are spread around the world.

From our perspective, this argument is riddled with holes. Right now, China is the dominant supplier of solar-energy systems and plans on extending its lead. China is also making a push to develop state-of-the-art wind turbines.

While heavy hitters such as General Electric and T. Boone Pickens talk about their multi-billion investments in wind, there has been little competition to get these deals. Sooner rather than later, China will step in – and we know how that story ends.

The Journal also says that job creation in a burgeoning green sector could also lead to job losses in mature energy industries such as coal and oil.

Robert Pollin, a professor at the University of Massachusetts, Amherst, who co-wrote a study that questions the job target by the Obama campaign.

It said that $100 billion spent over two years could produce two million green jobs, according to the Journal. But his study didn’t count jobs that might be lost elsewhere in the economy if the country shifted to more expensive sources of green energy.

As we see it, more expensive energy leads to inflation, which also results in job losses. Businesses have to maintain a certain level of profitability, and if they’re paying more for clean energy it seems that heads will roll in the interest of net profits.

Once again, the numbers point to higher investments in fossil-fuel infrastructure versus clean energy. It’s not that we’re opposed to a cleaner environment, but new technologies in fossil-fuel discovery, reduced emissions and improved efficiency will continue to provide bigger returns in fossil fuels.

Biofuels can boost incomes and yields for farmers, revitalizing impoverished rural areas when they are introduced in countries with secure land ownership, the International Institute for Environment and Development said.

By raising the price of crops such as corn and palm oil, biofuels can reduce poverty in countries with a high dependency on agriculture, the London-based researcher said in a report with the United Nation’s Food and Agriculture Organization.

“Despite the highly polarized debate, biofuels are not all good or bad,” lead author Lorenzo Cotula of the IIED wrote in the report. “Biofuels can either help or harm the world’s poor depending on the choice of crop and cropping system, the business model, and the local context and policies.”

“Ethanol stocks were moving higher for a while,” says Charles Delvalle in Investor’s Daily Edge, “but have gone down since the middle of last year (maybe investors are catching on to how ‘not green’ ethanol really is). Geothermal producers are shooting higher. And those who sell wind turbines are making great money on increasing orders.

“By 2030, Morgan Stanley expects green sales across the globe to total over $1 trillion (that’s bigger than the Gross Domestic Product of 169 of the 181 member countries of the International Monetary Fund!). Most people I speak to see green technology as the wave of the future. It’ll only be a matter of time until they think that investing in green companies is a no-brainer.

“In the end, this whole green movement we see today could very well be the start of yet another massive bubble. And considering the riches that were made during the two previous bubbles, catching the green investment mania early on would be a great way to make a lot of coin in the next few years.”

Chris Mayer in The Daily Reckoning reckons it’s time to consider investing in an essential biofuel ingredient: sulfuric acid.

“The biofuel boom has kicked off a big increase in the demand for sulfuric acid. In fact, some 60% of the sulfuric acid ends up in agriculture. The surge in ethanol production is a double whammy on sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000-4,000 tons of sulfuric acid per year.”

Global consumption is growing almost twice as fast as for oil, it is the cleanest-burning of the fossil fuels, and it is comparatively cheap: it currently trades at about half the cost of crude oil on an energy-equivalent basis.

In an energy-hungry world, it’s therefore not surprising that there’s now a mad scramble to procure long-term supplies and bring them to market.

Let’s take a look at some of the current major developments…

Pipelines. Russia, which has the world’s biggest reserves of natural gas, is building a direct link to Germany beneath the Baltic Sea, and planning others to China and Italy. These are enormous undertakings. The 3,000km Italian link, for example, is expected to cost $15bn.

Elsewhere, the ConocoPhillips-BP pipeline to bring North Slope gas from Alaska to Canada’s oil sands industry and the lower 48 US states will be the largest private-sector construction project in North America. And the pipeline China is building from Turkmenistan in Central Asia to Shanghai will stretch for 9,000 kms.

Liquefaction. An alternative means of moving gas is to liquefy it by freezing, ship the liquids across oceans, then turn it back into gas. The technology is not new, but LNG (Liquified Natural Gas) facilities are hugely expensive. For years this limited its transportation to countries not accessible by pipeline, mainly Japan.

But high energy prices have now made LNG viable on a large scale. And there are other advantages. European nations, for example, nervous about their increasing dependence on Russian gas, are looking to alternative sources such as North Africa, using LNG. China signed a $60bn deal with Qatar last month to buy three million tons of LNG a year over 25 years from 2011.

With its volumes growing 7% a year, LNG is the fastest growing of the fossil-fuel industries. Because of the massive investments required, it is dominated by a handful of very large multinationals.

New Reserves. Oil majors are boosting efforts to find and tap hydrocarbon deposits that are primarily gas, with oil as a side-product.

The newly-discovered Sugar Loaf field under the Atlantic off Brazil, claimed to be one of the world’s biggest, is primarily a natural gas resource. The Shtokman development in the Barents Sea off Russia’s Arctic coast, and several projects off the coast of north-west Australia, focus on production of gas, not oil.

There is also increasing interest in exploiting hard-rock resources that have been neglected in the past because it’s difficult to tap their gas. On the western slopes of the US Rockies, Exxon Mobil is starting to employ an explosive fracturing technique three times more effective than conventional technology to unlock the riches of the Piceance Basin.

Coal-bed Methane. The “fire-damp” found in coal deposits – the curse of miners throughout the ages – is almost pure methane and an excellent substitute for natural gas, which is about three-quarters methane. It may be recovered from worked-out collieries or from coal deposits left unexploited because they are so gassy they are too dangerous to mine, and already accounts for a tenth of natural gas production in the US.

BG Group, the global specialist in the discovery, extraction and supply of natural gas, plans to build the world’s first plant to produce LNG from coal-bed methane piped 400km from fields in the interior of Queensland, Australia.

Liquid fuels. Although currently used as gas to fuel central heating, industrial furnaces and power stations, natural gas can be converted into liquid fuels. In Qatar, which has the world’s third largest gas reserves, they’re building plants to do just that.

Worldwide demand for natural gas has been growing at an average rate of nearly 3% a year, compared to oil’s 1.7%. China’s gas consumption is forecast to triple over the next 12 years, India’s to double. Yet between them they have less than 2% of global reserves, so they will be forced to look to imports from the Mideast, Russia and Australia.

Investing in natural gas: major role in power stations

The strongest demand growth area for natural gas is in electricity generation. Dirk Beeusaert, chief executive of Suez, the world’s biggest operator in the field, says the investment cost per kilowatt of power from gas turbines is “half that of a coal plant, and a third of that from a nuclear plant of the same capacity.”

Gas power stations can be built quickly, are flexible in operation, reduce dependence on other resources such as coal, oil and nuclear – and have particular attractions in these times of ecomania. Not only do they produce less greenhouse gases than other fossil fuel, but they can be used efficiently to generate intermittent power, to fill the gaps when turbines driven by wind and water shut down because of calms or droughts.

A couple of decades ago, gas accounted for little of the world’s electricity generation; now it fuels almost one-fifth.

Although the oil majors are giving increasing attention to finding and producing natural gas, most of the world’s resources are closed to them, or are politically high-risk. Russia seeks to use its gas supplies as a strategic weapon in its dealings with Europe and is squeezing out foreign companies. Iran is a different kind of political minefield. Qatar is happy to partner international oil firms, but is also right in the middle of the potentially explosive Middle East.

One country that is benefiting from all this is Australia, which has reserves almost as large as those of the US, production that is likely to continue expanding for the next quarter-century, and a business-friendly environment. Chevron’s Gorgon project alone, which got its go-ahead from regulators a few months ago, expects to produce more than a trillion cubic metres of gas over its 60-year life.

I have been extensively researching the global energy crisis that’s now underway. My research is uncovering some very interesting investment candidates with lots of profit potential. The interesting thing is…NONE of these firms are traditional big oil & gas firms that investors are so fond of.

Crude oil soared as high as US$135 a barrel last week – more than double the price of a year ago. But big oil firms like ExxonMobil WILL NOT be cashing in on the next phase of the energy boom.

Instead, the richest investment opportunities can be found in the fast-emerging alternative energy sector.

That’s where oilman T. Boone Pickens is putting his money – his company Mesa Power just placed an order for US$2 billion in wind turbines. And there’s much more profit potential in other parts of the alternative energy sector too – especially alternative fuel.

• The market for ALL alternative energy sources grew 40% last year alone to US$77.3 billion and will explode into a US$250 billion industry within 10 years.
• Bio-fuel grew to a US$25.4 billion market last with more than 15 billion gallons of ethanol and biodiesel produced globally – more than double the output of just four years ago.
• The worldwide Bio-fuel industry will continue to enjoy explosive growth for years to come – expanding into a US$81 billion business within the next 10-years!

But you don’t have to wait two decades or even two years to start making serious money from this energy-sector market shock…

Fossil fuels are dead – the future belongs to alternative energy. Vast fortunes will be made in the “great fuel revolution!”

MIKE BURNICK, Senior Editor & Global Markets Analyst

P.S. I’m pulling the trigger on my first market-shock recommendations to take advantage of the great fuel revolution. My first pick is a renegade oil firm that develops “HemiCell-190″, which already powers 2.6 million cars. My second selection is a “giant killer” that just scooped-up gold-mine in alternative energy assets that ExxonMobil threw away. Subscribers to my signature research investment service Market Shock Trader will be hearing from me about even more ways to profit. Very soon, I’ll be sending them specific rifle-shot plays to cash in on alternative energy!

Source: Legendary Oil Man Turns Back on Oil

As I said on Friday, Congress just passed a US$57 billion alternative energy plan – that promises to do little but make the headlines.

Meanwhile, in another chamber of Congress, executives of big-oil firms were called on the carpet to account for recent sky-rocketing crude oil prices.

Congress wants to know why crude oil is soaring past US$135 a barrel – double the price of last year! Hmm… more demand than supply maybe?

Of course Congress just doesn’t get it! As the CEO of ConocoPhillips correctly points out, “The fundamental laws of supply and demand are at work.” We are getting squeezed by oil exporting nations that are “managing demand for their own interest,” and severely restricted access to energy reserves both at home and abroad.

Today, the International Energy Agency said that a major supply crunch is looming unless the world’s oil majors can ratchet up production by 12.5 million barrels a day within the next seven years. Uh… don’t count on it.

Decades of underinvestment in new energy exploration and development, and a seismic shift in who controls access to new energy deposits means sustainable high prices for years to come. Fossil fuels are a dead-end for American big-oil firms – it’s time to embrace an alternative energy future!

MIKE BURNICK, Senior Editor & Global Markets Analyst

Source: Congress Doesn’t Understand $135 Oil

How does one control the inflationary trends that are happening worldwide? Surely, this is not a simple question to answer, even for specialists. Every time my colleagues and I meet, we cannot reach an agreement regarding how to control inflation, particularly in a context where international energy and food prices keep increasing.

One of the conclusions we can reach without much discussion is that strong food and energy price increases are striking all world economies, and that net commodities exporters are benefiting from these price spikes.

The second conclusion that we are able to gather from this situation is that countries having great natural resources, that are not yet net commodities exporters, now have a great opportunity to gain from the current economic situation.

This is exactly the circumstance that Brazil finds itself in currently. For two decades now they have had an effective policy regarding oil (fossil fuels), but now they are looking to expand their interests in biofuels and in developing policies to promote the cultivation of grains. In this way, Brazil is demonstrating a way not only to limit dependence on imported commodities, but also how to benefit from the current high international prices of commodities.

Thinking now of Mexico, the first thing I ask myself is: to which extent are these high energy and food prices affecting the Mexican economy?

Due to inflationary concerns, on the 16th of May, the Bank of Mexico decided not to modify interest rates. Inflationary pressures keep mounting along with concerns regarding a potential recession in the US: “Inflationary pressures in the world and in Mexico keep increasing and it is a growing concern.”

The Bank of Mexico’s governor, Guillermo Ortiz Martínez, noted a few days later: “There are still inflationary pressures because processed food prices could still go up, even though there is a more stable grain price.”

Inflation is worrying Mexico and there are concerns about a potential economic slowdown there as well… But there is also another situation that worries Mexico and this one is related to the development of energy reform there.

Reform within Pemex, the nation’s oil company, is at the center of this debate. Pemex plays a vital role in Mexico’s economy due to the huge profits that it generates. These profits, in turn, are used to fund areas within the infrastructure of Mexico such as education, security and other social programs.

For the first quarter of the year, 45% of the country’s income came from Pemex. This contribution by Pemex to the state treasury is particularly significant because oil production is decreasing and the known reserves have diminished significantly in recent years.

Pemex’s production peaked back in 2004, but ever since then it has consistently declined. Its oil production has fallen 1.3% in 2006, another 5.3% in 2007, and during the first quarter of this year it fell 7.8% below production levels during the same period last year.

However, it is most worrisome that between 2000 and 2007 the proven oil reserves in Mexico fell 54%, according to data from Pemex’s own annual stock report.

And while oil prices keep on skyrocketing (breaking the $130 barrier) Mexico is losing a great opportunity. With these high prices, now is the time for Mexico to begin looking towards investing in its future. However, the bad economic policies of the Mexican government are leading to a lack of any such investments at the current time.

But there is still time to change history by changing these policies; and to accomplish this Mexico needs massive amounts of capital for investing in its future. Thus the key issue for Mexico to resolve, and quickly, is how to find this necessary funding.

And one cannot forget that Mexico is not the only country in the region that is squandering its future growth opportunities. Argentina is as well and I will talk to you more in depth about this matter tomorrow. Today I have an opportunity to hear several renowned Argentine economists speak at an interesting conference at the Sheraton Hotel. Tomorrow I will specify their ideas and forecasts regarding Argentina, for you, our Latinforme readers.

We will meet again tomorrow,

Horacio Pozzo

Editor’s note: With oil prices climbing to higher than $133, to what extent does Mexico benefit from this? Is it taking advantage of this special time? Enjoy the following article and send your comments to: paola@latinforme.com or on our website at www.latinforme.com

Ay, Caramba! If it’s not one thing it’s another with these pesky fossil fuels. At what point do we say “enough is enough”? It’s high time the world kicked its oil and gas habit… and the way things are going, we soon might not have a choice.

But where there is pain, there is profit. The free market is good at solving problems for that very reason. Whoever figures out how to wean the world off oil will get very rich indeed — and some farsighted companies are preparing to do just that. Sally Limantour has the details, and some big profits in hand to prove her case. Read on to find out more.

Warm Regards,

JL

Silicon Valley Titans Turn Oil Pain Into Billions

by Sally Limantour, Editor, Taipan

Crude oil trading above $130 a barrel has lots of folks tearing their hair out. But out west in Silicon Valley, the VC boys are grinning from ear to ear.

Why? Because they know that the world’s oil pain is their gain… to the tune of tens of billions in profits, or maybe even more.

Take John Doerr, for example. You may not have heard of this Silicon Valley titan, but in the world of venture capital he’s an investing legend. As a partner in one of the world’s top VC firms, Doerr amassed a huge fortune for himself with pre-IPO stakes in companies like Netscape, Amazon.com and Google.

Now Doerr is onto the next big thing: “cleantech,” which is shorthand for clean energy technology.

Doerr is convinced that opportunities in the cleantech space will be as lucrative as anything he’s seen before. (From the man who helped launch Netscape and Google, that’s really saying something.)

70% Gains for Starters

The good news is you don’t have to be an ultra-connected VC like Doerr to make a killing in cleantech. There are amazing opportunities here for regular investors like you and me.

Showing is better than telling, so just take a look at the following chart.

That’s the chart of a cleantech stock I recommended in the most recent issue of the Taipan newsletter. The company is a respected leader in a rapidly growing industry, with exciting technology and a $2 billion-plus market cap.

The pick was added to the Taipan portfolio as a patient investment buy. Little did we know that the very next earnings report would blow the roof off Wall Street’s expectations. Shortly after we got in, the stock soared by more than 70% in just weeks.

I’ll be advising my readers to take partial profits soon — that’s just good discipline when the profits come pouring in that quickly. But at the same time, this move is no flash in the pain. We’ll be holding at least half the position for major long-term gains, as this company and others like it show potential for 100%, 200% or even 500% to 1,000% returns over the next few years.

With more than $1.5 billion in assets, PBW is one of most popular, diversified ways to invest in solar, biomass, wind, and geothermal energy. Common sense tells us when the holy trinity of fossil fuels – crude oil, coal, and natural gas – rise in price, companies that provide cleaner substitutes should also rise in price.

Today’s chart tracks the ratio between the price of crude oil and the price of the Clean Energy ETF. When the ratio hits around 3 or below, clean energy stocks are popular and soaring. When the ratio moves past 5, clean energy shares are out of favor and lagging the gains made in crude oil.

PBW’s only been around for three years, and this indicator is pretty rough… But with oil approaching $130 a barrel and clean energy stocks out of favor, expect a rally from the “treehugger-approved” companies of the world.

Source: Clean Energy Stocks Are Due for a Big Rally