Earlier this morning, I couldn't help but pause my work and watch as the price of crude pushed passed $126 a barrel earlier.

But I understand, it's Friday, and I'm sure many of you are watching the clock tick slowly.

So today, we'll keep it short and sweet.

When we talked about investing in Bakken oil stocks last Tuesday, our focus was on how to invest in the emerging Bakken play. strictly on the U.S. side of the Bakken formation. As one of you put it in an email, "I see the Bakken as a great, long-term investment, especially as drilling technology improves and increases the recoverability rate."

I couldn't agree more.

Perhaps the only thing that could cool off the Bakken is if oil prices tumbled. Yet think about that for a second. Even if crude oil plummeted 20%, we'd still be looking at $100 a barrel. And to be honest, I don't see that happening. Especially during the summer months.

But I also told you there were two ways to play Bakken oil.

Tapping into the Canadian Bakken

I'm sure you can guess the direction I'm headed. After all, the U.S. portion of the Bakken oil formation is only one side of the story. Remember, the Bakken formation also extends into Southeastern Saskatchewan.

This might not be the first time we've talked about the light oil pools in Saskatchewan, and it certainly won't be the last. If you need further proof that Saskatchewan oil plays are heating up, just remember the record land sales happening this year. April's land sale auction drew in a record $265 million in revenue for Saskatchewan. And yes, dear reader, that was a record.

Let's look at April's land sale a different way. The revenue generated last month was more than all of the land sales in 2007. I'm not sure you need much more to convince me there's a oil boom going on in Saskatchewan. And I know what you're thinking, "That sale was for the entire province, not just the Bakken."

Well, that's true. However, the Weyburn-Estevan area pulled about $207 million in bonus bids, which we can attribute to interest in the Bakken.

Okay, so the oil's there. But in the words of one of my colleagues, "Don't just worry about how much oil is underground, also focus on production."

Invest in Bakken Oil Stocks

With that in mind, I see two ways for investors looking to get a piece of the Canadian side of the Bakken.

The first is to look carefully at the smaller producers. Granted, they may not be spending the most or even have the most money in the bank, but they're also not trading for $100 a share. In other words, they can give you the most bang for your buck. They are also, however, a lot more riskier than some of the major players.

Earlier this month, I told my readers to look Canadian oil stocks like TriStar Oil and Gas (TSX: TOG). The company has grown an impressive 17% since. The good part is that TriStar seems to be gaining steam. The company had its most active drilling quarter to date in the first quarter of 2008.

The second option available for us are oil companies in Alberta expanding their operations into Saskatchewan. You know my stance on the Alberta oil sands. I believe the future of oil sands isn't in the gigantic shovels and house-sized trucks.

The reason?

Simply put, 80% of the bitumen is too deep to be mined. That means companies now have to use in-situ methods (in other words, the bitumen in the ground has to be heated up before being pumped it out).

Ever since Alberta has changed their royalty rates, companies are starting to see the grass is greener on the other side of the fence. Over the last few months, some of my favorite oil sands companies have been staking a claim in southeast Saskatchewan.

But no matter how you go about with your personal investments, the most important advice I can offer is that you should always do you own due diligence. Above all else, make sure you comfortable with the company before dishing out your cash.

Until next time,

Keith Kohl

Energy and Capital

P.S. Looking to get your Bakken investments started? I would suggest joining your fellow Energy and Capital readers. I know they've had tremendous success so far in the Bakken. Six out of their last eight Bakken plays have already gone into double-digit gains. If you're interested in finding out how they've managed it so far, I'd suggest checking out the $20 Trillion Report.

The world's biggest cartel is set to bring its members over $1 trillion this year, beating Department of Energy estimates by $150 billion and soaring over last year's net by 57%.

That's stellar performance...

But then again, OPEC's price-fixing ability makes increasing revenue a self-fulfilling prophecy...

Right?

Well, a few major factors could break the cycle:

• OPEC members departing the cartel

• Non-OPEC oil production rising in places like Brazil, Canada and Kazakhstan

• General distaste for price-fixing in politics and public opinion

Indonesia's "Wells Are Drying"

Indonesian President Yudhoyono told the world this week that the country's OPEC membership is in question because, quite simply, Indonesia's "wells are drying."

Indonesia, eastern Asia's only OPEC member, joined the ring two years after it was launched in Baghdad in 1960.

Since then, that country of over 17,000 islands has turned from an export power into a net importer—production declined from 1.66 million bpd in 1980 to 1.1 million in 2006, while daily consumption tripled over the same period.

Economic growth at over 6% a year, even factoring in the 2008 slowdown, means Indonesia has to hold on to what it's got left.

Indonesia has revisited its OPEC membership in the past, but decided to stay on to maintain high-level relations with big-time oil powers like Saudi Arabia. After all, Indonesia has the world's highest Muslim population, giving it another major tie to Gulf exporters.

Indonesia isn't the only country to consider leaving OPEC in recent years.

And declining production isn't the only reason for splitting, as Nigeria can attest.

Low Prices Almost Drove Nigeria from OPEC

It seems like it must have been a previous lifetime, but in 2002 oil was around 20 bucks a barrel.

That's when Nigeria and OPEC were at odds over the country's "undisciplined policies" and production that exceeded daily OPEC quotas by 300,000 bpd.

New Nigerian production was coming online at the time, and national leaders and companies operating there got vexed by low limits coming from OPEC headquarters in Vienna.

These days, Nigeria is making the news with illegal pipeline siphoning and rebel attacks that shut down production and refinery facilities, putting them in danger of under-producing by OPEC standards, and leading to a higher risk premium in futures trading.

Like any club, membership in OPEC comes with commitment, but benefits too. That's why the threat of attrition is balanced by new members who want to tap OPEC"s power and expert-sharing structure.

Ecuador and Angola Come On Board OPEC

Ecuador, South America's second-largest oil supplier to the United States, was a member of OPEC for two decades before leaving in 1992, to produce more oil than Vienna was mandating at the time. Ecuador rejoined under new center-left leadership in 2007, and is now like Nigeria, below quota.

Angola cast its lot with OPEC for the first time in 2007, and the country is now the third largest crude oil producer in Africa, behind Nigeria and Libya. Consumption hasn't grown at such a high rate in Angola as in Indonesia or even Ecuador, because the economy is anemic.

So there's still room for Angola to ramp up output before worrying about domestic supplies.

In non-OPEC countries like the U.S., the situation is one of trying to maximize export profits while turning away from oil for domestic use.

Some experts say what we're seeing now may be the last hurrah for non-OPEC production.

Non-OPEC Production Falters

"No non-OPEC member is in a position to produce more," says energy expert Francis Perrin. "They are selling all the oil they can."

Perrin includes reputed fossil fuel saviors like Kazakhstan's Caspian basin, Brazil's recent deepwater offshore finds, and even Canada's oil sands in that appraisal, saying declines in high-quality North Sea fields can't be offset by hard-to-get, sour crude from the latest sources.

Canada's oil has to be cooked, Kazakhstan's 1.5 million bpd Kashagan field is delayed another few years, and Brazil's Carioca field is in a "pre-salt formation," at depths that have been known to melt even uranium-tipped drillbits.

Companies like Noble Corporation (NYSE:NE), which specializes in deepwater offshore exploration, will thrive in the high-pressure environment.

The Oil Service HOLDRs ETF (AMEX:OIH) is also a great play on rising prices and interest in new resources.

What's more, commodity cartels are coming into fashion, and OPEC is always the reference point (after all, you'd probably rather draw a parallel to OPEC than to Colombian drug lords).

Iran and Russia have been talking about a "gas OPEC" for a couple of years now, and Vietnam is quietly pushing forward with the idea of a five-country Mekong Delta "rice OPEC" as grain prices skyrocket.

To make a long story short, OPEC is widely seen as a model for success with no real rival in the energy world. Until that changes, it's a force we're going to have to reckon with.

Regards,

Sam Hopkins

www.energyandcapital.com

I said no: "The profits that big oil might make at this point I don't think are necessarily off the table in terms of being available to invest in the technologies of energy of the future. I think instead of taxing income and profits, we ought to be looking at ways to incentivize the fuels of the future."

Just two days earlier, a group of heirs of John D. Rockefeller, the founder of Standard Oil (the precursor to Exxon) had made the same point, but in a different way.

They had staged a media appearance, declaring publicly that they weren't satisfied with the direction the company was taking, and wanted it to invest more in exploring alternative energy. They also wanted the company to tackle the climate change challenge head-on, rather than resisting it.

The press was quick to pick that story up, along with the $10.9 billion in profit ExxonMobil reported for the first quarter of the year.

But most of them missed the real point.

This wasn't just a story about a shareholder revolt, with the Rockefellers wanting to split the CEO and board chairmanship into two positions, to gain leverage over the direction of the company. Nor was it really about Exxon's enormous profits.

It was a nothing less than a major milestone in the history of Big Oil.

A Turning Point for Big Oil

Just a few years ago, Exxon's CEO Rex Tillerson said he wasn't interested in getting into the alternative energy business. Oil and gas was enough for them. (This was before Sen. Jay Rockefeller sent them a letter in 2006, demanding that they stop funding denialist "research" designed to confuse the public about global warming.)

Now, the old money in the company is telling him to get with the times, or step aside.

"They are fighting the last war, and they're not seeing they're facing a new war," said Peter O'Neill, the founder's great-great-grandson who now heads a Rockefeller family committee of shareholders.

The "war" he's referring to, though perhaps an unfortunate choice of words, is the struggle to maintain profitability in an oil industry where:

• The capital costs are enormous,
• The investment horizons very long,
• The good prospects are diminishing, and
• The price of your product fluctuates to extremes.

The company's management has been around long enough to remember when oil fell from $37 in 1980 all the way down to $12 in 1998. Consequently, they are reluctant to commit billions of dollars to the remaining drilling prospects even with oil at $120, fearing that it could fall back to $60 well before the investment has paid off.

Their charge has been to manage the company to maximize shareholder returns over the long run, not to solve the impending energy crisis.

Downplaying peak oil, injecting squid ink into climate change science, and minimizing investment in environmental protection are all in pursuit of their goal.

But Big Money has different objectives than Big Oil.

The shares the Rockefellers own were handed down from the very formation of the company in 1870. As shareholders, they are less concerned with next quarter's balance sheet than they are with long-range macro issues, like overpopulation, the future of energy, the health of the environment...and the future of their business.

Their perspective has brought the enormous challenges of the immediate future into view-challenges that the ExxonMobil leadership may be too micro-focused to think about.

The Rockefellers' case was made clearly by Neva Rockefeller Goodwin, a PhD economist and great-granddaughter of the family patriarch, in a Fox Business interview on May 1:

The problem isn't the past, and it isn't the present, it's the future. We see a world that's changing very rapidly, with resources becoming more scarce, particularly compared to demand, and of course with petroleum this is obvious; everyone's feeling the pain of the price at the pump. And with the prospect of climate change, which is causing governments to put on regulations to raise taxes to think of things like cap and trade, which is only going to increase further the price of oil, and it's causing consumers to wonder, should we be using so much fossil fuel energy, which is causing climate change?

With all these changes happening, Exxon does not show the nimbleness and the entrepreneurial imagination that my great-grandfather had, to make the change. He saw the need to change from whale oil to petroleum-based fuels. Equally important changes are in the winds right now and changes can come very fast. And this company isn't responding, because it has a corporate culture which is so aware of how well they do in so many ways that they're not as open as they should be to the need to do things differently. Our hope is that their excellent board, if given more power in the company, can be the portion of the company which thinks more broadly, thinks more strategically, is more open to information and analysis to allow them to move forward.

[Transcription mine.]

She went on to chastise the company for investing only $10 million a year into a Stanford grant for alternative fuel research, when BP and Chevron are investing billions in similar initiatives.

Asked what she would like the company to do, she said, "I would be very happy to see a billion dollars a year into alternatives."

Shape Up, Don't Ship Out

Have the Rockefellers gone off their rockers? Have they swallowed the green Kool-Aid?

Not at all. They simply have their eye on the long term. They want the company to remain alive and viable for another 100 years.

But Exxon seems to be looking to close up the shop.

As my regular readers know, I have viewed Big Oil's increasing rate of stock buybacks and dividend distributions as a signal that they're finding fewer and fewer good sites to drill for more oil. Instead of prospecting in the ground, they've been prospecting on Wall Street, buying up smaller companies to replenish their reserve numbers.

Now even those prospects are diminishing. In the absence of good investment opportunities, they're giving the profits back to the shareholders.

According to Neil McMahon, an analyst at Sanford Bernstein, "At the rate of current stock buybacks, Exxon will have no privately held stock within 15 years."

That would simply not be the case if there were accessible gushers out of oil out there, just waiting for somebody to stick a drillbit in them.

Exxon vice-president Ken Cohen obliquely confirmed this point, saying the company was able to "fully fund all the attractive opportunities we have."

The operative word here is "attractive."

The best remaining unexploited fields in the world are either completely under the control of national oil companies and off limits to the oil majors, or they only offer a limited production partnership role for the oil majors, while keeping the reserves and windfall gains for themselves.

For example, Exxon's production in Africa, where a large part of those remaining and accessible global reserves lie, fell a whopping 20% as it was required under contract rules to give more of the production to host country governments as oil prices rise. Said McMahon, "Over the next five years their slow production growth guidance may not come to pass at these high oil prices given production sharing agreements."

Exxon's dispute with Venezuela over the nationalization of its oil fields also cut into its production for the year.

The company's worldwide oil production now stands at just under 2.5 million barrels a day. That's right, the world's largest publicly traded oil company accounts for just 3% of the world's oil production.

Exxon isn't alone in having such troubles.

BP's oil production has been stagnant since 2005. Shell's has been falling since 2002. And ConocoPhillips only managed to increase its production last year due to its stake in Russia's Lukoil.

So where is all the money going?

ExxonMobil by the Numbers

Let's look at Exxon's numbers, on an annual basis (some annualized from Q1 2008).

• Net Income: About $40 billion
• Capital spending and exploration: $21 billion last year, reportedly growing to $25 billion a year over the next five years.
• Spending on share buybacks: $32 billion, or about a third more than its capital budget
• Dividends: $7.6 billion

Cash on hand: About $41 billion-again, after fully funding its "attractive opportunities."

Yet, despite spending about half their income in new oil, Exxon's oil production actually fell 10% year over year, and its oil and gas production overall fell 5.6%.

With this perspective, Big Oil's profits look less like a "windfall" than they do prudent management of a business in decline.

And going after those profits as a way to force funding in renewable energy is a bad idea. History shows that the market is a far better allocator of investment capital than the government.

Government can offer incentives, but we should let the shareholders of Big Oil chart a new course for their companies to invest appropriately in the energy of the future.

"We Should Leave Oil Before It Leaves Us"

The need to transform the energy industry was made clear in a brief essay by Fatih Birol, the chief economist of the International Energy Agency (IEA), back in March.

"We are on the brink of a new energy order," he wrote. "Over the next few decades, our reserves of oil will start to run out and it is imperative that governments in both producing and consuming nations prepare now for that time. We should not cling to crude down to the last drop - we should leave oil before it leaves us." [Emphasis mine.]

He went on to say, "Oil production by public companies is reaching its peak. They will have to find new ways to conduct business."

Dr. Birol and the Rockefeller clan are on the same page. They all realize that the best days for the oil industry are in the past, and that a transformation to a new energy regime, particularly electric transport, is urgent and necessary.

As Dr. Birol concluded, "The really important thing is that even though we are not yet running out of oil, we are running out of time."

Hopefully, Exxon's management will get the message, and start taking a more proactive approach to the challenge, as its peers have done.

Whether they do or don't, though, we have an abundance of ideas here at Angel Publishing. We put out trading recommendations on the next generation of energy and transport all the time in such newsletters as the Alternative Energy Trader and The $20 Trillion Report.

As our favorite young startups gain momentum, they'll be perfect takeover targets for Big Oil.

Until next time,

Chris

Do you remember being told this back in November?

How about two months prior, when Goldman Sachs explained how oil prices would average $85 a barrel in 2008? By December 2007, Goldman Sachs raised their price target by $10 a barrel. They even mentioned that oil could reach up to $105 a barrel in a year.

Try to remember what it was like paying $105 a barrel for light sweet Texan crude. I would suggest holding on to that memory. We may never see oil that low, ever again.

Today, Goldman Sachs has decided to come out with a new prediction. This time, however, Goldman analysts turned their estimates up a notch, suggesting that oil prices might rise between $150 and $200 a barrel within 24 months.

Don't worry, the analysts were quick to cover their tracks, "...though predicting the ultimate peak in oil prices as well as the remaining duration of the up-cycle remains a major uncertainty." Well, at least they appear fairly confident that oil's ride isn't over.

Considering that oil prices have increased by about 76% over the last nine months, a similar rise in 2008 (and during the peak summer driving season, I'd like to add) would put oil prices around $214 by next January!

The story hasn't changed. Tighter supplies, growing demand in China, India and the Middle East have helped push prices. Producers are having trouble finding new reserves. Now tack on the speculators, the geopolitical violence, potential weather volatility and the U.S. dollar declining. Can you really see oil falling below $105 a barrel in 2008?

I hate tossing you the doom and gloom without some kind of hope for investors. Brazil has made two nice discoveries lately, but imagine how much it will cost to extract that oil. The layer of salt they need to drill through is a mile thick!

Bakken Oil Stocks

I'm pretty sure you've heard about the 25,000 square miles in Montana, North Dakota, Manitoba and Saskatchewan that makes up the Bakken formation. I know for a fact that a majority of my readers have had tremendous success after investing in some of our favorite Bakken producers.

We've been over the latest U.S. Geological survey that reported the Bakken holds up to 4.3 billion barrels of recoverable oil. After the report was published, your concern wasn't whether there was oil in the formation or not.

We know there's a lot of oil there.

Instead, you should be focusing on who the players are... on the best Bakkan stocks for your money. Just because a company has been able to snatch up some land in the Bakken doesn't make them worth your time and money. With all the attention the Bakken has been receiving lately, not everyone can come out on top.

Let's face it, dear reader, it's time to stop talking and start drilling.

Two Ways to Play Bakken Oil Stocks

Rather than concentrating on companies that are getting into the action late, I'd focus on a few solid companies that are aggressively going after the Bakken oil.

Just take a look at Continental Resources (NYSE: CLR). The company has raised its capital expenditures from $616 million to $783 million. Care to take a wild guess on where most of that money is going?

In order to extract the crude from the Bakken, companies have to utilize horizontal drilling techniques, which can become quite expensive. Remember, the USGS report only took into account the oil that can be recovered with current drilling technology. Rest assured, that technology will continue improving as oil prices keep climbing.

But no matter how bullish you are on the Bakken formation in North Dakota and Montana, don't forget that the U.S. side is just half the story. The second best way for investors to get in on the action is in Saskatchewan.

I know the most of my readers think of Alberta whenever I mention a Canadian oil rush. That's understandable. This Friday, however, I'm going to show you why some oil sands companies are beginning to move into the Bakken formation.

Don't be surprised when you recognize a few of the players dipping into the light oil pools in Saskatchewan.

Until next time,

Keith Kohl

Energy and Capital

P.S. You can stop trying to figure what side of the Bakken to put your money. My energy and capital readers have had a ton of success playing both! You see, the $20 Trillion Report has been able to target some of the best Bakken players. The best part, though, is that these companies have just started to grow. Find out more about the $20 Trillion Report now.

That's what Chief Executive Mark Levin has to say about the matter.

He runs a company called Home Office Solutions Group (HOSG), which sells furniture to small businesses.

The company has reported its green sales are 'going strong', despite an overall decline in average purchases being attributed to what some would call a 'rough patch' in the economy.

In fact, one of HOSG's most popular items is the Think chair, manufactured by Steelcase Inc. (NYSE: SCS).

The chair is made with as much as 37% recycled materials and can be sold at retail for $569. Steelcase's Leap chair—which is very similar, just not green—sells for $250 more.

So you see, green doesn't always cost more.

But recycled materials aren't the only thing making the Think chair green.

Steelcase also has committed to buy all the renewable energy credits generated by a Texas wind farm in an effort to reduce its carbon footprint.

The wind farm from which Steelcase will purchase its electricity was built by a Deere & Co. (NYSE: DE) subsidiary.

All of a sudden we have this green menage from a group of companies that aren't generally thought of as pioneers in the field. And there are plenty of others consdering investing in wind energy as well.

The Growing Use of Wind Energy

That's because companies from multiple sectors are seeing an accumulation of reasons to go green.

For starters, some companies are going green to take advantage of tax credits spawned by legislation on The Hill. Some of those tax credits expire at the end of the year, and companies are hastily implementing projects to ensure they get their breaks.

Even if such projects require a little more up front capital, the long-term benefits are being realized through higher efficiency and lower energy usage.

Plus, more stringent energy legislation is on the way. So some companies—even those formerly opposed to such rules—are taking action to stay ahead of the energy policies they know are in the pipeline.

I'm talking, of course, about laws requiring less emission of greenhouse gases or the increased use of renewables, or both.

Most recently, we saw Ohio enact legislation requiring 12.5% of its electricity to be generated renewably by 2025.

Including Ohio, 29 states have now enacted some sort of renewable portfolio standard (RPS). That's 58% for those keeping count.

Right now, wind energy is the renewable resource of choice for generating utility-scale power.

In 2007, wind generated revenues soared above $30 billion for the first time. That number is expected to grow 177% in the next ten years to $83.4 billion.

Just last year the U.S added 5,244 MW of new wind capacity—a 45% expansion. Total installed wind capacity now stands at 16,819 MW, with another 3,626 under construction.

Wind Energy Investing: The Foreign Winds are Blowing

What most don't know is that the domestic wind energy market is currently being dominated by overseas players.

With the exception of General Electric, foreign competitors—mostly from Europe—have taken a strong position as wind market leaders.

Because of their early aggression in tackling environmental issues, it's no secret that European firms have led the way in many renewable technologies. Their cavalierness has led Germany to be the cradle of the solar revolution, the Scots to take the lead on wave power and a Portuguese/Spanish/Danish tandem to lead on wind.

Last year, Energias de Portugal—the national utility—bought Horizon Wind Energy from Goldman Sachs for $2.15 billion—the highest price ever paid for a wind-only company.

For its part, Spanish company Acciona acquired rights to about 1,300 MW of wind farms in the Midwest.

But the U.S wind market isn't the only one that's booming. Europe still has billions to claim as well.

In its most recent report, the European Wind Energy Association (EWEA) said that wind became the leader in terms of new installed energy capacity.

Through 2020, wind is expected to account for 34% of new generating capacity. It'll account for 46% from 2020-2030.

And the goal of attaining 12-14% of Europe's power from wind by 2020 is well within reach.

By 2020, it's expected that 180 gigawatts (GW) of electricity will be supplied by the wind—enough for about 107 million European households.

For that to happen, wind-based capacity needs to increase 9.5 GW per year through 2020. That shouldn't be too hard, considering the EU installed 8.5 gigawatts worth of wind capacity last year.

In addition to the companies mentioned above, Green Chip International has its investment portfolio primed to take advantage of all growth in the wind industry—no matter where it happens.

The portfolio includes a global clean energy ETF and three foreign-based companies with significant wind exposure, amons several others. All are set to capitalize on the coming growth in the global wind business.

But the one I'm most excited about is going to release its first quarter earnings this Thursday.

Company revenues are expected to rise nearly 20% and net profit is forecast to rise 135% over the same quarter numbers from 2007.

When these numbers come out, I assure you investors will go crazy. Some analysts are predicting a target price some 23% higher than it is now.

This is surely a company you want to be invested in before the first quarter numbers are released. As I write this, the price is already starting to tick northward.

But only Green Chip International members are going to be privied to the information needed to profit from the company that's as close to a sure bet as it gets. So become a Green Chip International member today!

Call it like you see it,

Nick

President Bush recycled the same old nonsense about drilling in the Arctic Wildlife Refuge. You know, the place that supposedly holds about 10 billion barrels.

According to the Energy Department, opening up the refuge to oil development would only slightly reduce our dependence on imports, and lower prices by less than $0.50 a barrel.

Heck, we'll get a bigger upward move than that if someone sneezes too loud near a refinery.

Incidentally, even if they did open up the refuge to oil development, the oil wouldn't even start flowing for at least 9 years. That'll put us around 2017!

Then Hilary Clinton and John McCain proposed a gas tax holiday that, according to economists would just push the price of gas even higher.

Since refineries cannot increase their supply of gasoline in the space of a few summer months, any lower prices would just boost demand - rewarding Big Oil, instead of the consumer.

Not surprisingly, we haven't heard a peep out of the oil companies on this one. But mention a repeal of all that free money we keep giving them, and they'll rally the million-dollar lobbying troops in a New York minute.

Fortunately, on a local level, some real progress is actually being made with renewable energy standards.

Thank Ohio's Renewable Energy Standards for the Next Round of Investor Profits

Last week, after a unanimous vote, the Ohio State Senate sent new legislation to the desk of Governor Ted Strickland. This legislation establishes a 12.5% renewable electricity standard (RES) by 2025.

And the Governor is expected to sign it.

Now what does this mean for investors?

Well, when it comes to renewables, this is a wind-heavy state.

And according to the American Wind Energy Association, if wind energy constitutes 75% to 95% of the standard, the bill would establish a market for as much as 7,000 megawatts.

This is huge.

And for companies like Gamesa (MCE:GAM.MC), Iberdrola (MCE:IBE.MC), and GE (NYSE:GE), this could provide an absolute avalanche of hefty turbine contracts.

We also expect to see a number of smaller wind developers stepping up to take advantage of this opportunity. Much like we've seen in the past with wind developers in California.

Renewable Energy Standards and Wind Development 

In fact, Green Chip Stocks members are already profiting from one small wind developer with revenue-generating properties in Palm Springs and Tehachapi, California. These are the two hottest wind-generating spots, with transmission, in the country.

But beyond the money we've already been making here (and will continue to make in the near future), there's still something much bigger at play.

· Ohio is a huge industrial state that uses a lot of power. This enables the state to become a very important market for renewables.

· This legislation could help jumpstart the state's manufacturing sector, which is highly-skilled, and looking for work.

· With Ohio on board, there would now be 26 states, plus the District of Columbia, that have mandatory renewable energy standards. That's more than half the country!

If the federal government can't get its act together and do this, the individual states will.

Of course, once the new residents of 1600 Pennsylvania Avenue move in, that could change as well.

But in the meantime, we'll continue to profit—with or without the government's support. Just like we've been doing since we started. And just like we'll do once Ohio's new legislation becomes law.

To a new way of life, and a new generation of wealth...

Jeff

Natural gas prices are up (rising over 90% in the U.S. since August 2007), and so is its popularity as energy icons like T. Boone Pickens are pushing for liquefied natural gas to become a viable transportation fuel to replace refined oil.

Below, I'll tell you about a Russian ETF that is capitalizing on Russia's prime position in the important international natural gas trade.

First, check out the following chart on natural gas futures.

As you can see in this chart, natural gas prices run in cycles. But the trend is heading up.

You see, leading European consumers are eager to secure steady supply on favorable terms, which means dealing with Russia. For years, that has meant dealing with one leader—Vladimir Putin.

That's about to change when a new president takes power May 7.

President-elect Dimitri Medvedev's first official trip was announced this week, and it will take him to Russia's two biggest neighbors and major energy allies, Kazakhstan and China.

Kazakhstan is expected to come out with at least a jump of 1 million barrels of oil per day after 2011, and China is the world's second largest energy consumer, with a growing appetite for natural gas that pollutes less than coal.

But right now, current President Vladimir Putin is putting ink to paper in Greece, a country that doesn't even border Russia, and was never a Soviet satellite state. Greece will however be an integral part of Russia's export future and a key transit point for European energy.

Russian Natural Gas and the South Stream Pipeline Project

The South Stream pipeline project, which will carry some 10 billion cubic meters of natural gas through Greece every year (of 30 billion in potential capacity), is a joint venture of Russia's gas export monopoly Gazprom and Italy's energy titan, Eni.

From a Russian compressor station, natural gas will be pumped under the Black Sea to Bulgaria, and then overland to Greece and Italy.

And it turns out that, when all is said and done, Medvedev's first jaunt as president to Kazakhstan and China, and Putin's Mediterranean connection in his closing days may not be so far apart in terms of Russia's national economic interest.

Buried in the news reports of Tuesday's Russian-Greek bilateral agreement on the South Stream pipeline was a hint that Central Asian gas would soon be transported through the conduit, in addition to original Russian fuel.

"Central Asian" is code for "Kazakh" in energy circles, because Kazakhstan is one of the last and best hopes for traditional fossil fuel.

By bringing millions of barrels of oil online, Kazakhstan is sure to see gas production ramp up as well. After all, the new wave of fossil fuel production and profit means new facilities built in the country may take advantage of gas byproducts rather than burning it off in wasteful flares.

And with tight connections confirmed by a new Russian president, even as the old one hangs around, Gazprom's got the bead on Kazakh gas, making it not only a Russian gas export giant but a king in international transport as well.

The Russian ETF on a Long Run

... Which leads me to why I'm sticking with my recommendation of the Market Vectors Russia ETF (NYSE:RSX).

The RSX ETF has continued its rise since I last told you about it in March, not rising directly in line with natural gas prices but certainly tied to fuel. The Russian ETF's top holdings include:

• Gazprom
• Rosneft (Russia's national oil exporter), as well as
• Nickel giant Norilsk... and a few non-resource plays like mobile phone service provider Vimpel (NYSE:VIP) to boot.

You can bet on the RSX ETF, with Russia poised to maintain its perch on top of the world's natural gas industry.

Regards,

Sam Hopkins

I had the privilege of appearing on the Fox Business channel, to talk about why oil prices are so high and what the future holds for oil. (See it here: Part 1 and Part 2.)

In typical TV interview format, I was set up in opposition to another energy analyst who is well known for his cornucopian views. Him on one side of the "panel," me on the other, and the moderator.

You probably know what happened next: I sat there trying to stare at a barely visible camera in a small studio in San Francisco with only an ear bud and no video, thanks to the 5-second delay from New York, while the moderator gave the vast majority of our two short segments to the cornucopian, who called me a "peak freak."

I had to grin at that one. (Personally, I prefer the less pejorative "peaker.")

As he carried on about how technology will save the day, achieving vast increases in oil extraction, and about the 12 trillion barrels of oil left to exploit worldwide, I could barely stifle myself.

Unfortunately, they afforded me no opportunity to respond to any of those points. They only seemed to want my opposing view—that oil would stay more or less permanently over $100 a barrel—to make the segment "fair and balanced."

I tried to explain the importance of flow rates, the concept of a plateau at the top of Hubbert's Peak, the limits of enhanced oil recovery, and the time it takes to bring new solutions to market, but my words seemed to fall on deaf ears.

As any student of peak oil investing knows, this stuff is complex. It's hard to talk about in TV sound bites. Especially when you have to explain the gulf between the 12 trillion barrels of original oil in place that my opponent was talking about, and the 1 trillion barrels of remaining recoverable oil that I was talking about.

Presumably, Fox Business thought it best to leave it to the viewer to figure that one out.

What can I tell ya. I did what I could with it. Another appearance is scheduled for tomorrow. Maybe I'll get a few more words in next time.

Evolution of a Peak Freak

I really can't blame the media for their reluctance to face up to peak oil. It's an unpleasant concept and it immediately strikes fear into one's heart.

I have often reflected on how coming to grips with peak oil is much like the process of grieving, as identified by Elisabeth Kübler-Ross in her 1969 book, On Death and Dying. In peaker terms, I'd describe it like this:

1. Denial: "There's plenty of oil out there, and we can drill our way out of this."
2. Anger: "Why aren't those bastards drilling our way out of this?"
3. Bargaining: "Well maybe ANWR, the continental offshore, the tar sands, and slightly more efficient cars will fix it."
4. Depression: "Oh man, we're screwed, it's too big a problem for me, I might as well give up."
5. Acceptance: "I'm ready for the second half of the Age of Oil and I'm going to find a way forward."

Stage One: Denial

My interview segment was an all-too-typical display of denial. Great: that's Stage One. It's a start.

Then I mused: How long have we been living on the banks of denial? And it slightly depressed me today to discover that I wrote an article by that very title back in September 2005, which I could have written today:

Energy will continue to get more and more expensive. In a short while, you won't be able to afford to fill the tank on an SUV. You will learn to like wearing sweaters, and living without A/C. If you live in a big city or a suburb, you will probably have to move. If you're in one of the red-hot real estate markets in the US, the value of your property will take a couple of sickening drops. Your money and investments will devalue. You will find it increasingly difficult to buy—or even get—food. Water will get scarcer, more expensive, and harder to clean.

Let me tell you, it gives me absolutely no pleasure to say that I was right. I've been trying to help keep this from happening for over a decade, and I've never wanted to be right less in my life

Yet, there are critics who claim that people like me are part of some unnamed shadowy conspiracy of "liberal elites" determined to destroy the economy, and other even less charitable characterizations. They say we're all congenital doom-and-gloomers.

I used to puzzle over that, until I realized that it was just denial.

Most peak oil deniers, I have found, are incredibly resistant to any sort of detailed discussion involving facts and numbers, and I have learned better than to argue with them.

But the fire in my belly says that we had better hurry up and move on here, because time is a-wastin'.

Stage Two: Anger

Stage Two seems to have arrived. Just in the last few months, we've seen it everywhere in response to food shortages, fuel shortages, panic buying, huge price increases and crazy volatility in the markets.

Over the last week fuel price spikes, panic and outrage were seen in the UK as a two-day strike shut down the Grangemouth refinery in Scotland, which in turn shut down the Forties Pipeline, taking over 40% of the UK's North Sea oil and gas production offline. As of yet I haven't seen much considered discussion about how that kind of vulnerability should inform future energy policy, but there's plenty of finger pointing going on.

In Congress, the anger was evident as well. And as usual, they came up with some terrible and short-sighted proposals.

Senator Bernie Sanders (I-VT) proposed a windfall oil profits tax, a notion supported by both Senator Obama and Senator Clinton. Such proposals always come up around earnings season for the oil companies, but they're a bad idea because oil companies have few economical prospects left, and reducing their economic prospects even further is counter-productive.

Senator Amy Klobuchar (D-MN), along with Senator Clinton and others, called for an investigation into market manipulation, speculation and possible gouging. Most senators also appear to support a temporary halt to filling the SPR (see my article of last week, "High Gasoline Prices Are Here to Stay," on why that's a bad idea.)

Credit where it is due: President Bush was right to dismiss the suggestion, on the grounds that removing 68,000 barrels a day from an overall U.S. demand of 21 million barrels a day wouldn't help bring oil prices down.

Several senators also want to close the "Enron Loophole," and make energy trading subject to federal regulation. That much I fully support, since I've still got my own anger about the way they bent me over back in 2001.

Clinton and many other senators even proposed filing a WTO complaint against OPEC to pressure them into opening the spigots a little more. Talk about biting the hand that feeds you!

Congress might as well tilt at wind turbines.

Even President Bush was forced to address the energy price issue again—a topic he has studiously avoided while America cried uncle—but he deflected the blame.

"I firmly believe that, you know, if there was a magic wand to wave, I'd be waving it, of course," he said during a news conference. "I've repeatedly submitted proposals to help address these problems, yet time after time Congress chose to block them."

As if he doesn't know that we can't drill our way out of this problem domestically!

I guess anger, like most things, comes around and goes around.

Anger is understandable, but it's not productive. We have to move on.

Stage Three: Bargaining

Bargaining seems to be the stage for our presidential contenders.

Senator McCain, joined by Senator Clinton, suggested a little gasoline tax holiday, which is akin to a first class upgrade on the Titanic.

Senator Obama called that one right, saying, "This isn't an idea designed to get you through the summer, it's an idea designed to get them through an election."

Indeed, a whole host of bargaining strategies are on offer from our leaders, such as:

• Increasing production of biofuels and other alternative fuels such as coal-to-liquids (CTL), when it's already clear that the consequences of both are unacceptable, and that the contribution they could make is too little to make a tangible difference.
• Raising the CAFE standard to 55 mpg by 2030, when PHEVs can already do that, and you can buy a car today anywhere in Europe that will do that. In 2030, remind me to mail them a letter saying thanks for nothin'.
• Spending another $150 billion toward renewable energy research. That's great, and I'm all for it, but it's also roughly what we've already been paying every year for the war in Iraq. Given the challenges we're facing, we should be investing at least as much in domestic alternative energy and rail as we are spending on the war, which ultimately is about perpetuating a dying paradigm of fossil-fuel burning automobiles.
• A lousy $1 billion for intercity rail, and $1.5 billion for public transit, when those are clearly—clearly—the most important and immediate investments we could contemplate. Instead of being at the bottom of the list, this should be at the top.

I suspect that Senator Obama may be nearing the end of the Bargaining phase, since he has quite sensibly called for a complete overhaul of US energy policy.

Moving Forward

Whoever is elected to the presidency, the next four years virtually guarantee that he or she will soon see Stage Four: Depression. There are going to be some extremely painful and difficult choices to be made.

So I hope that Acceptance will not be far behind. We have a great deal of transformation to accomplish, and very little time to do it.

Each of us has to go through this process in our own way and time. Every peaker is going or has gone through it. After five years of going through it, I'd put myself almost completely in Acceptance, although I do revisit the previous stages from time to time—another dynamic Kübler-Ross observed. It just seems to be how we're wired.

It's difficult. So I have some sympathy for every position on peak oil, including denial, because I've been there myself.

However, I have found one thing to be true time and time again: Action feels a lot better than inaction. Talking to other people about it, making plans to deal with it, and taking action helps to still that gong banging away in the brain, and relieve the tightness in the chest.

Reducing your energy consumption not only saves you money, it feels a lot better than raging at oil producers.

It also helps—a lot—to know that I can improve my odds, and hedge the inevitable losses of rising prices for everything, by investing wisely in energy. It really helps to take the sting out of a $70 fillup to see a couple hundred, or couple thousand dollar gain in the ol' portfolio.

Take a moment to think about where you are in this process, and may that reflection inform your future choices well.

Your friendly Energy and Capital peak freak,

Chris

His reply was a little quicker than I had anticipated, "Yeah, I've been talking about the Barnett shale for a while now. I love it. I think it's the largest onshore gas field in the U.S."

The second I heard him mention the Barnett, I knew he had no idea what I was talking about. I didn't want to keep him in the dark for long.

Don't get me wrong, dear reader. I've been watching companies break through the Barnett shales for a while. Back in September, I suggested checking out Devon Energy (NYSE: DVN), which has jumped about 40% since.

Not too shabby.

They weren't the only ones that made investors happy, either.

After hearing my friend's response, I couldn't help giving him the news. I thought for a second before answering, "You might not want to say that last part just yet."

You see, the new Marcellus formation could make the Barnett shales look quite small in comparison.

The Marcellus Black Shale Formation

To be honest, I'm actually surprised that a number of my readers had no idea about the Marcellus formation.

The Marcellus formation is located in the Appalachian Basin and part of the Devonian black shales. It stretches from New York through Pennsylvania, Ohio, Maryland and West Virgina. The fact that natural gas is in the area isn't the question. In fact, the Appalachian basin has a long drilling history, going as far back as 1815. The Marcellus shales are found approximately a mile below the surface.

Although the region has been drilled countless times, it is still largely unexplored. We're talking about hundreds of thousands of wells that have been drilled in the Basin, yet the overwhelming majority were done at shallow depths.

One of the reasons the Marcellus shales are getting more attention is due to the horizontal drilling success on the Barnett shales. The technique isn't cheap. Drilling a horizontal well with hydraulic fracturing can be three times more expensive than a regular vertical well.

Let me put it this way, companies that are going to spend that much money are going make sure the well will produce. If the wells don't produce a substantial amount of natural gas, the company will end up losing money from drilling costs.

Okay, so how much natural gas are we talking about here?

Back in 2002, the United States Geological Survey (USGS) reported that only about 1.9 trillion cubic feet of natural gas was technically recoverable.

Well, things are about to change.

In December, 2007, two professors, Terry Engelder and Gary Lash, reported that the Marcellus shales could hold 167 trillion cubic feet of gas. And that was based on their conservative estimates. Their higher estimates suggested the formation could be as much as 500 trillion cubic feet. If you take into account a 10% recoverability factor, that comes out to almost 20 trillion cubic feet.

The potential is clearly there, but the question is, "Is the risk worth it?

Investing in Marcellus Shale Gas

Look, you don't need me to tell you there's a huge upside to Engelder and Lash's report. Even if their conservative estimates turn out to be correct, that's a lot of natural gas for the U.S. As you know, natural gas markets are regional (we'll leave liquefied natural gas out of this for now). As imports from Canada and Mexico decline, the U.S. could use the production boost to keep our up with our natural gas demand.

Personally, I'd look for some of your favorite Barnett plays to move into the Marcellus formation. Most of these companies have had tremendous success with horizontal drilling in Texas, why not make a move to an area with a stronger resource base?. Take a look at XTO Energy (NYSE, XTO), for example. Two weeks ago, XTO made their jump into the Marcellus play after paying $600 million to Linn Energy's Marcellus acreage.

Until next time,

Keith Kohl

Energy and Capital

P.S. While I'm on the subject of white-hot energy plays, many of my readers have already made their first round of profits off the massive Bakken formation. The best part, however, is that its not too late to get a piece of the action. If you're interested, I'd recommend checking it out for yourself at the $20 Trillion Report.

That's what some car owners are doing in Utah, where gas is selling for $0.638 per gallon.

The only caveat: it's compressed natural gas (CNG), not the unleaded liquid stuff we're used to.

According to the Natural Gas Vehicle Coalition, Utah boasts the country's lowest rate for the increasingly popular fuel. But no matter where you buy it, CNG is undoubtedly cheaper than the national average price of $3.60 for regular unleaded.

So you can see why the fuel—and the cars that burn it—are rapidly growing in popularity. Private ownership of natural gas cars and trucks in Utah has grown from basically zero to over 5,000 vehicles in just a few short years.

Use of the fuel is growing so fast that Utah's 20 public CNG stations are struggling to keep enough in supply. Fleets requiring CNG, including a local Coca-Cola distributor, may find it easier to come by at the state's 71 private fueling facilities.

Markets & Incentives for CNG

Of course, Utah probably has the cheapest CNG prices in the nation. But even in California, where the price stands at about $2.50 per gallon equivalent, the novel fuel is a bargain.

Still, the cheap prices haven't kept Utah-based utility Questar Corp. (NYSE: STR) from turning a tidy profit. Questar is the cheapest provider of natural gas in the continental U.S. And it can offer CNG at even lower rates thanks to federal tax incentives.

But don't let the cheap price of their product fool you. Questar stock has climbed 29% in the past three months. And if the current trend is any indication, this one is going to go higher. Take a look at the upward trend the company has been in for years:

You see, the utility isn't the only attendant at this natural gas party to receive incentives. Purchases of new, qualified used and some converted vehicles are also eligible for federal and state tax incentives—some up to $7,000. In many cases, the $7,000 incentive is enough to offset the associated premium of buying a CNG-fueled vehicle.

Right now, new CNG vehicles are only available in New York and California. And only one company, Honda Motor Co. (NYSE: HMC), is making them.

According to company executives, they can't make the specialized vehicles fast enough. Nonetheless, they're fast-approaching making new CNG vehicles available for sale in Utah to capitalize on the booming market.

Until then, consumers are doing all they can to get their hands on used CNG vehicles and to convert regular gasoline engines to run off the stuff.

Can you blame them? With oil less than a dime away from $120, you can bet the nascent natural gas vehicle market is on the cusp of exploding.

Investing in CNG

There are a number of ways to get a leg up on this emerging market. And they don't have to be strictly CNG-related.

As you may know, CNG is just a storage option for natural gas. Made mostly of methane (about 75%), natural gas can be stored in its original gaseous state or it can be liquefied (LNG) or compressed (CNG).

So at this point, any exposure to natural gas is probably good exposure.

Natural gas contracts for June 2008 have climbed from around $7.33 per million British thermal units (MBTU) to over $11.00 in the las five months or so.

One way to get in is through a sure bet like the aforementioned Questar Corp. The company is in a serious uptrend that I think will only go higher along with demand for more economical and environmentally friendly fuel and vehicles.

I've also talked to my colleague Keith Kohl about natural gas stocks. Without hesitation, he offered Range Resources (NYSE: RRC) and Chesapeake Energy Corp. (NYSE: CHK) as two of his favorite plays.

Both have been going gangbusters lately and are well-established companies in the sector.

But there's a younger company that could soon explode the way Range and Chesapeake have.

It's a manufacturing company with an engine that runs off CNG. The company has been loading up contracts from city and state fleets around the country.

And I want you to have first crack at it. All the details are included in this full CNG report.

Call it like you see it,

Nick