Energy is a hot topic right now, and for good reason -- prices have soared over the past couple of weeks. They started up after a powerful cyclone hit Oman, which shut down a major terminal that ships 650,000 barrels of oil a day. It continued, pushing oil over $67 a barrel, when the Department of Energy announced on June 14 that both a drop in refinery utilization last week due to maintenance downtime and an increase in gasoline inventories for the summer driving season.

I have been on the road a bit more than usual lately, and it sure looks like a lot more RVs and general traffic than the last couple of years. It could be the weak dollar has convinced Americans to vacation at home this year, but high gas prices are not affecting traffic.

Just a few months ago, the official OPEC line was that they are "comfortable" with oil around $50 a barrel. Now they are saying they are "comfortable" with oil between $60 and $65. That's because they don't think there's any low-cost oil left to be found, and they are not worried about the alternatives being available in sufficient volume to make a difference in the next 10 years. They are right on both counts. Many of the new energy technology out there could show incredible growth, without putting a dent in oil prices for five to ten years.

In the "oil shock" in 1981, after long lines at the gas pumps, Exxon spent $40 billion to find new oil. Now, with oil prices about double those "oil shock" levels, Exxon spent about half as much on exploration in 2006 as they did in 1981, while paying much higher prices for labor, drilling rigs and everything else.

BP, the old British Petroleum, has been pumping oil from Alaska's Prudhoe Bay for almost 30 years. Their original estimate for the life of the field was 25 years. To keep it going, they spend billions of dollars maintaining old equipment and pipelines. Recently, they discovered a leak that forced them to shut down a fourth of their production -- 100,000 barrels a day -- and the news caused oil prices to jump. But the entire field is at end of its life and in the oilfield equivalent of intensive care. It will be gone soon.

The same story is playing out at older oil fields around the world. Worldwide oil production is supposed to hit 87 million barrels per day by the end of 2007, but it is going to be tough. This could be the year of peak oil production. With the low level of new discoveries and the high cost of finding oil, it will take just a few more of the old monster fields going into depletion mode to start annual production shrinking
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What does this mean for us? With the hurricane season officially underway, even a return to normal from last summer's extraordinarily quiet period would be an additional shock to the system. A higher-than-normal year, as is being forecast by the same folks who blew the forecast last year, would be a disaster for oil prices -- but great news for energy technology stocks. (You can find one of my favorites in this area in the June 20 post.)