Says Matt Simmons
CNBC.com

The global financial crisis and collapse in the oil market have stalled vital investment in oil exploration and production and are likely soon to lead to a sharp spike in prices, an energy consultant and financier says.

Matt Simmons, founder of Houston-based investment bank Simmons & Co, argues the underlying rate of decline of the world’s ageing oilfields is as much as 20 percent a year and only high levels of investment can reduce that to single digits.

(snip)

"We are three, six, maybe nine months away from a price shock. We are not talking about three to five years away — it will be much sooner," Simmons told Reuters in London.

"These prices now are dangerously low. The lower prices fall, the less oil will be produced and the greater the chance of an oil spike," he said.

(snip)

IEA Deputy Executive Director Richard Jones warned the oil market this week that so far as much as 2 million barrels per day (bpd) of new upstream capacity due to come on stream had been deferred for now due to lack of funds and low oil prices.

My comment: if you are a long term investor I do not think you can go wrong buying unhedged reserves in the ground in relatively politically secure areas. I like Suncor (SU) for its stability, Niko Resources (NKO.TO) due to the huge production coming online, and Bankers Petroleum (BNK.TO) as a higher risk play with great management.

John Polomny
The Real Deal