The Peak?

Two peaks are on my mind.

Peak oil. It's amazing to me that there was any doubt for anyone who had read Hubbert's basic argument for peak oil. It is just a question of when. It would have already occurred if it weren't for technology. But I think it is a dim hope that technology will delay the peak long enough to effect market changes to make the transition smooth. As Charlie Munger has observed, it is unfortunate that we are eating through our supply of petroleum NOT because we rely on it so prevalently for transportation, but because we rely on it so prevalently - and without practical substitutes - for agriculture. Fertilizer is predominantly petroleum-based, and for these fertilizers, there are no petroleum-free alternatives. Clearly, the worrying risk associated with peak oil is not a collapse in Real GDP, it is a Malthusian catastrophe as agricultural land productivity plummets without recourse. This sets up the (admittedly slim) potential for extreme irony, as the vilified company Monsanto could literally end up responsible for saving millions of lives with the greater land productivity of their genetically-modified seeds.

The solution? Hedging massive real price inflation with stock holdings that will soar with oil prices. Trickier than it sounds, of course. If oil prices really take off, governments will tax oil producer profits (even though that discourages investment in new production). More practical for long-term safety is Transocean (RIG), who owns the world's largest fleet of oil rigs for underwater drilling (it is important to appreciate that deepwater oil deposits are undergoing the early stages of a large and rapid secular growth phase, as they become economical to develop with higher oil prices). Oil services companies are not as obvious of targets for windfall profit taxation, and better yet, Transocean is not an American company, but a Swiss company.

More exciting is peak #2, and is the absurd terror I feel approaching as so many things recently have gone my way. I have a very short history with determining my own destiny, so the concept of providing myself with significant amounts of satisfaction and joy is fairly foreign. And, I have to admit, I am a little skeptical.

The solution? Relax and take one day at a time, perhaps? But what am I going to spend my summer doing?