Editor’s Note: Meeting the Challenge is an open-ended series from EnergytechStocks.com intended to build a blueprint for how the world can meet the incredible increase in all forms of energy that will be needed by 2030 without endangering the environment or nations’ security. In the coming weeks and months, recognized experts will share their ideas, and important new investment themes (including some that could turn out to be worth many billions of dollars) should emerge.

Posted: September 5, 2007

While he finds Matthew Simmons to be credible, John Felmy, chief economist at the American Petroleum Institute in Washington, DC, doesn’t agree with the Houston-based energy investment banker that the world is hitting a point of “peak oil” production. “The molecules are there,” says Felmy.

But Felmy does agree that the future of energy is beset by challenges and uncertainties that are going to make it difficult for the world to increase daily oil production by some 30% to 35% between now and 2030, which is what forecasters have said will be necessary. “The molecules are there but how do we get them?” Felmy rhetorically asks.

As we will see in future parts of Felmy’s six-part series of stories, the API economist sees promise in certain non-petroleum sources of transportation fuel. Overall, however, he expects the world’s rapidly-rising number of cars and trucks to continue running on petroleum for at least another quarter century. “I just don’t see anything non-petroleum based” that will be able to take petroleum’s place, he said.

Meeting the challenge of securing the world’s energy future will require an investment of trillions of dollars in the global oil industry, Felmy told EnergyTechStocks.com. Where will all that money come from?

Felmy sees two major potential sources, neither of which, he says, is necessarily going to open its wallet sufficiently. The first is national oil companies (NOCs), especially those in the Middle East that control much of the world’s remaining known reserves. “I don’t feel real positive about those investments being made,” he said.

The second is Wall Street. But for investors to be willing to take the plunge, Felmy said that a number of political and economic uncertainties that surround the energy industry must be dealt with. These include whether governments will impose carbon taxes and constraints on consumption, both of which are under discussion. They further include the cost uncertainty surrounding so-called nontraditional oil sources, namely: tar sands, shale and heavy oil. Together, these three could add significantly to global oil supplies, according to Felmy.

Throughout his extended interview with EnergyTechStocks.com, Felmy used the word challenge. Having enough additional supply by 2030 will be a “big challenge,” he said. Getting NOCs to make the necessary investments will be an “enormous challenge.” Still, it is a challenge he is optimistic can be met – though at a cost of several trillions of dollars.

Asked what will happen if the challenge isn’t met, Felmy said simply, but ominously, “You’ll see price increases.”

Part 2 of Felmy Series Will Run Friday, September 7