Peak oil, or the point in time when petroleum extraction has reached its maximum and production declines, has drawn a lot of attention from speculators. The impacts of oil supply not meeting demand is often expected to have devastating consequences on the world's economy and quality of life, but industry analysts like Robert Rapier are quick to argue this view is riled with misconceptions.
According to Rapier, there are many possible outcomes to a peak oil scenario, whether that be a imminent catastrophic decline of oil production, or a non-event coupled with other energy sources to fill the supply gap, one can only speculate from here.
In an essay titled 5 Misconceptions About Peak Oil, he argues that when the oil industry says "peak oil is nonsense," they are not referring to the idea of "peak oil" but rather the hype around it involving catastrophic events and a dramatic decline of modern civilization.
"But there are also people who believe peak oil will inevitably lead to cleaner environments, closer communities, and healthier food. Then there are those who believe that peak oil will lead to a dirtier environment as we become more desperate for energy and turn to more oil sands and coal to replace declining oil supplies. There are people who believe peak oil will be a minor inconvenience because there are plenty of sources capable of replacing oil. And there are those who believe certain elements of all of the above."
Addressing peak oil myths
He also strives to correct ideas about oil supply. For one, when oil production is complete, and when all oil producers have packed up their drills, you can be sure oil will still be in the ground. Extraction techniques (and costs) may never catch up to the difficulties posed by accessing such reserves. So peak oil does not mean we are running out of oil.
For another, he claims oil companies have not been using the idea of peak oil to inflate prices. In fact, most oil companies publicly argue that production will not decline for decades.
Lastly, he debunks the idea that peak oil is denied by oil companies that are worried about alternatives. If so, it would be difficult to explain why most have been working for years on a number of alternative energy methods such as algae, cellulosic ethanol, pyrolysis oil, butanol, and solar. "The scientists and engineers that work at oil companies aren't just sitting around basking in the final days of the age of oil -- a very common misconception. They are thinking about what comes next, and investing to make sure that when it does come, the oil companies are in the position to provide it and profit from it."
Most of us can agree that global production will inevitably decline and modern civilization will be affected one way or another. How do you think it will play out?
Investing ideas
So, what do oil industry insiders think of peak oil and its potential impact on their businesses?
For ideas, we started with a list of the 200 biggest companies involved in the oil industry. We collected data on insider buying and identified eight oil stocks that are being boosted by insider bullishness.
Worried about peak oil? These insiders think there's still loads of potential in their share prices -- do you agree?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
List compiled by Eben Esterhuizen, CFA:
1. Kinder Morgan Management (NYSE: KMR ) : Operates as an energy transportation and storage company in North America. Over the last six months, insiders were net buyers of 15,000 shares, which represents about 0.02% of the company's 74.22M share float.
2. Chesapeake Midstream Partners (Nasdaq: CHKM ) : Operates, develops, and acquires natural gas gathering systems and other midstream energy assets in the United States. Over the last six months, insiders were net buyers of 7,534 shares, which represents about 0.02% of the company's 34.62M share float.
3. Western Gas Partners (NYSE: WES ) : Engages in the acquisition, ownership, development, and operation of midstream energy assets in east and west Texas, the Rocky Mountains, and the Mid-Continent. Over the last six months, insiders were net buyers of 359,975 shares, which represents about 0.73% of the company's 49.46M share float.
4. SandRidge Energy (NYSE: SD ) : Operates as an independent natural gas and oil company in the United States. Over the last six months, insiders were net buyers of 1,369,450 shares, which represents about 0.4% of the company's 346.63M share float.
5. NuStar GP Holdings (NYSE: NSH ) : NuStar GP Holdings, LLC owns general partner and limited partner interests in NuStar Energy L.P. that engages in the terminalling and storage of petroleum products, transportation of petroleum products and anhydrous ammonia, and marketing of asphalt and fuels. Over the last six months, insiders were net buyers of 74,270 shares, which represents about 0.21% of the company's 34.81M share float.
6. Crosstex Energy (Nasdaq: XTEX ) : Operates as an independent midstream energy company. Over the last six months, insiders were net buyers of 176,490 shares, which represents about 0.58% of the company's 30.17M share float.
7. QR Energy (NYSE: QRE ) : Engages in the acquisition, production, and development of onshore crude oil and natural gas properties in the United States. Over the last six months, insiders were net buyers of 63,300 shares, which represents about 0.37% of the company's 16.94M share float.
8. Rex Energy (Nasdaq: REXX ) : Operates as an independent oil and gas company in the Appalachian, Illinois, and Denver-Julesburg Basins. Over the last six months, insiders were net buyers of 77,325 shares, which represents about 0.22% of the company's 34.97M share float.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Insider data sourced from Yahoo! Finance.
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