Book Review of: Black Gold

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Review of Black Gold, by George Orwel

Reviewer: Mark Lamendola

The subtitle of this book, "The New Frontier in Oil for Investors," would indicate this book is a guide to investing in oil. It is not. If you're looking for a manual that will tell you how to make gazillions of dollars from investments in the oil marketplace, keep looking. Black Gold does provide some good tips for investors, but few of those would be new to seasoned investors.

The real value of this book lies elsewhere: understanding the energy issues facing industrialized nations. This particular topic is one where the "ignorati" weigh in with various unfounded opinions and absurd suggestions--everything from suggesting Americans should boycott certain gas stations to assuming technology will provide new energy sources that make oil obsolete.

Orwel, unlike the "analytically-challenged" talking heads, very clearly presents the picture on the looming energy crisis. Is there really an energy crisis? Many "experts" assure us there is not. They point to alternative energy sources and say we have nothing to worry about because these sources are here now. All we have to do is switch over--no problem. Orwel dispels these notions by examining a few of these. For example, he points out that "We could line the Atlantic coast with windmills and still not make much of a dent in electricity demand."

Many experts who agree there is an energy crisis also say the easy solution is to simply extract more oil. They recommend such thing as drilling in ANWAR or expanding production in existing fields. The first recommendation ignores the realities of enormous lead times. The second one violates the principle of getting blood from a turnip. Even if we could do these things right now, they wouldn't fill the gap produced by projected demand in the near term.

Other experts say we need to conserve. They are correct, but we can't conserve enough to prevent ourselves from running out of oil in the relatively near future.

Orwel discusses how much oil we actually have, the problems in tapping into proven reserves, refining issues, and public policy problems that hamper any efforts to increase the oil supply. He also provides a detailed explanation regarding how most of the available oil is in politically unstable countries. A supply disruption is more likely than not, in the near future.

What about demand? Where has it all come from? Orwel tells us that, as well. But he is careful not to simply discuss the present drivers of supply and project a linear curve from there. He looks deeper, drawing on both historical data and emerging trends. By the time you get 50 pages into the book, it is fairly obvious that you don't need to read his biography to know he's an analyst, and a good one at that.

To me, this book is "required reading" for all people who have been surprised over the rise in gas pump prices in the last couple of years. For the rest of us, it helps us understand what's coming and how to prepare for it. From the book's subtitle we know the book will reveal some things about investment opportunities. But, it reveals so much more.