Forty years ago, British economist E. F. Schumacher wrote that "Small is Beautiful" in a famous book by the same name.
The vision champions market approaches that discount the importance of size to results, a philosophy that contrasted the notion that "Bigger is Better."
In bringing the idea of his teacher (Leopold Kohr) to a broader canvass and a wider audience, Schumacher began a debate that has revolved around the impact of technology and market size ever since.
Just last weekend, the debate renewed.
Again it was an English environment, but the subject matter would have been quite unexpected only a few years ago. This time the occasion was our annual energy consultations at Windsor Castle outside London. The debate focused on both size and profitability of oil companies in the development of new fields.
The key lesson: During expanding times in the oil business, like today, small is not only beautiful.
It is also profitable.
And it can be for you as well if you take the time to learn why...
Australia Shale Oil Discovery Continues the Country's "Lucky" Streak
Investors are well aware of the shale oil revolution in the United States. But the "revolution" does not end here; it is spreading globally to countries as diverse as China and Poland.
There is one country in particular though that may experience circumstances similar to the United States, if not greater.
I'm talking about Australia, which has often been called "The Lucky Country." That description was first penned in 1964 by Donald Horne and he actually meant it negatively at the time.
But in recent decades, the term has been given a positive spin thanks to Australia's abundance of natural resources and its geographical location near the world's biggest consumer of commodities - China.
And Australia may have struck luck again thanks to the recent announcement of a massive shale oil discovery.
The Arckaringa Basin Could Be the Largest Shale Oil Find of All Time
Over the past few days, I have released information on what could be the largest shale oil find ever recorded.
It's located in an area of Australia called the Arckaringa Basin and contains as much as 233 billion barrels (or more) of recoverable shale oil.
That's more than all of the estimated oil in Iran, Iraq, Canada, or Venezuela. And it's just 30 billion barrels shy of the estimated reserves in all of Saudi Arabia.
The discovery at the Arckaringa basin is so big it's already prompting some observers to begin talking about energy independence for Australia, much in the same way Americans did after similar discoveries in the Bakken, Marcellus, Eagle Ford, and Utica basins.
And there is one small company that controls what is shaping up to be the biggest worldwide oil project to hit in decades.
How China and Saudi Arabia Mean You Should Bet on Higher Oil Prices
As Money Morning Global Energy Strategist Dr. Kent Moors pointed out not long ago, the sky is not falling on oil prices despite what the doomsayers believe.
There are two crucial countries that are behind the recent rise in oil prices: China and Saudi Arabia.
And if these two nations keep on their current path, it will mean one thing...
Even higher oil prices in 2013. Here's why.
After Nexen's Buyout, How Should You Play Canadian Oil Sands Stocks?
The purchase of Calgary-based energy company Nexen Inc. (NYSE: NXY) for $15.1 billion by China's CNOOC Ltd. (NYSE ADR: CEO) is the largest overseas purchase ever by the world's second-biggest economic power.
But it will likely be the last time China, or any other country, takes a big chunk out of Canada's oil sands - the world's third-largest proven reserves of crude oil.
That's because after Canadian Prime Minister Stephen Harper approved the Nexen deal in December, he banned further foreign firms' investment in Canada's oil sands and will allow them only under "exceptional" circumstances.
"The government's concern and discomfort for some time has been that very quickly, a series of large-scale controlling transactions by foreign state-owned companies could rapidly transform this [oil sands] industry from one that is essentially a free market to one that is effectively under control of a foreign government," Harper said in December.
"Foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada," he added.
But foreign government control isn't the real problem facing Canadian oil sands companies.
Two Reasons to Expect Greater Volatility in Oil Prices
A combination of rising demand and tension in the Middle East means oil prices will continue to climb.
How this plays out in the short term will have a primary impact on the profitability of oil sector investments. One conclusion is already clear. This will once again be a volatile market.
And this time, volatility will be point upward.
That is not to say that the rise will be continuous or without occasional pull backs. In fact, yesterday we witnessed two contrary signals attesting to an ongoing collision of forces.
Both of these are exogenous to market factors, a very important observation to recognize moving forward.
The direct relationship between supply and demand would oblige a rise in oil prices for the simple reason that more end use is moving back into focus.
Both the International Energy Agency (IEA) and OPEC have raised demands projections for the near term. Those levels are now approaching less than 3 million barrels per day of global supply.
Now we are not going to have a crude shortage anytime soon, although there may be some regional constrictions on the horizon. Ample supplies are available for quick pumping to meet rising demand. Nonetheless, there will be a greater use of unconventional production (tight, shale, heavy, oil sands).
And that means the oil coming on market will be more expensive.
Knee-jerk reactions to global events will again pull on demand sentiment. That, in turn, will spike the volatility. Yet this is likely to be more subdued on the down side than at any time in the last year.
Pundits have also introduced the specter of another (or "double dip") recession and fanning the flames of that fear would prompt the price of oil to move south.
The likelihood of a recession is rapidly dissipating and the prospects of these fear tactics are declining along with that reality. Reversals, therefore, while still inevitable, will be short in nature so long as the current underlying dynamics remain. Those are now pointing up.
I have a series of personal indicators used to determine what should be happening with oil prices. There are 10 of them, designed to estimate the actual composition, strength, and direction of pricing movements. For the past month, six of them have been pointing positive. As of Friday (these are calculated at the end of each week), seven are now moving north.
The upward pressure is building, reflecting the overall higher revisions in forecasted demand by IEA and OPEC. Yet we are once again reminded that the oil market hardly operates in a vacuum.
And that leads me back to those two outside signals we received yesterday.
The Doomsayers Are Wrong About Oil Prices
The stock market is not the only thing that is up. Crude oil prices have jumped as well rising faster than the S&P for the past month.
West Texas Intermediate (WTI) next month futures contract prices for crude oil on the NYMEX increased again last week. That marked the seventh consecutive week oil prices have gained, the first time that has happened since 2009. Overall, WTI pricing level has risen 11% since mid-December.
Now all of this means something pretty important. As we've known for a while now, the oil market has been oversold with values unusually low. This has largely resulted from concerns over demand related to the ongoing recovery/recession debate.
However, that debate has never been a particularly genuine one, certainly not for the last two quarters.
Yes, if we fell off a fiscal cliff or ran into a budgetary wall or failed to raise the debt ceiling and the living room chandelier fell on our heads there would be some substance in the Chicken Little approach to market analysis.
But we haven't, and, we won't.
With Congressional approval ratings just above those of Attila the Hun, they will slink in, kick some cans down the street, and slink out. That means the penumbra behind which the doomsayers have operated is no longer worth the smoke and mirrors it is based upon.
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Why Oil Prices Could Soar 40% by Summer
Oil prices have continued their upward move that began at the end of 2012, gaining over 8% in the past month.
Now, an oil analyst with Goldman Sachs Group Inc. (NYSE: GS) predicts Brent crude could soar much higher in the next few months.
Jeff Currie, GS's head of commodity research, said he wouldn't be surprised "if we woke up in summer and oil cost $150" per barrel.
That would be a 35% gain from Brent's recent price of $111.
Using the narrowing spread between the Brent price and that of West Texas Intermediate (WTI), at $95, Currie's forecast implies a 40% increase in WTI prices.
And there are many reasons oil could hit those highs by summer, or even sooner.
Will the New U.S. Shale Boom Kill Oil Prices?
These days everybody wants to extol the virtues of rising U.S. domestic crude oil production.
From decades of increasing reliance on foreign providers, some hardly sympathetic to American interests, the new prospect of having significant unconventional oil reserves here at home has been a major development.
The assumption advanced says that domestic sources will be cheaper. As a result, this should comprise a positive boon to consumers of oil products but a problem for producers and refiners. In short, the mantra among some commentators is to proclaim the end of the oil market as an attractive option for investors.
As with most such simplistic observations, however, it turns out not to be true.
A number of these "analysts" are actually talking down the prospects of oil prices because they have already shorted the commodity and will benefit their own investments if they can continue the downward push.
Well, oil prices are now going up, with both West Texas Intermediate (WTI) in New York and Brent in London at more than three-month highs.
In addition, the spread between WTI and Brent is narrowing.
The narrowing of that spread is occurring while both benchmarks are rising in price. The mantra of the pricing doomsayers would expect it to be going in the other direction.
There are two broad categories of reasons why matters are not happening as the doomsayers had expected (aside from the obvious - they misunderstood the dynamics from the beginning).
And once you understand both, you'll be in position to profit as prices continue to rise.
Play the Bakken Oil Boom Like Buffett
Many investors have heard of the Bakken oil field in North Dakota and Montana, but most are unaware of how important this formation is becoming to the U.S. economy.
More germane to investors is the fact that there is still a lot of money to be made from Bakken oil in the months and years ahead.
Just ask Warren Buffett.
He spotted the potential of Bakken oil well ahead of most and bought a non-energy company that would benefit greatly from the boom. Three years ago he bought Burlington Northern Santa Fe (BNSF) Railway Co. for $26 billion.
That railroad is now one of the main beneficiaries of the Bakken oil boom. (And people thought he just had always wanted to own a train set!)
"We're the 1,000-pound gorilla in the oil markets," BNSF CEO Matt Rose told Bloomberg News. "Crude by rail is going to be really strong for us. It's been a real benefit to us to replace some of that lost coal business."
The Bakken oil formation isn't just an investing opportunity; it's transforming the U.S. energy landscape.