Big Dilemma for Big Oil

Demand for energy in all its forms is higher than ever, while the longstanding sources of supply are being more and more constrained.

The repercussions of energy use are broad and powerful, affecting individuals, corporations and entire nations, and the global balance of power is shifting as resource-rich countries flex their muscle in a new geopolitical landscape.

Now, energy is being squeezed from new forms of biomass and renewable sources in ways that can only be described as miraculous. Nuclear power, once considered to be dead in the water, is making a comeback worldwide.

Energy is changing who is in control, the environment in which we live and how we plan our future.

Because of this, energy grew into one of the most talked-about issues in 2007, and institutional money poured into the sector at levels never seen before. These trends are unlikely to reverse anytime soon, and certainly not in 2008.

Questions of Supply

According to Charlie Maxwell, senior energy analyst at Weeden & Co., next year could spell trouble for the major independent oil companies such as Exxon Mobil(XOM - Cramer's Take - Stockpickr), Chevron (CVX - Cramer's Take - Stockpickr) and BP (BP - Cramer's Take - Stockpickr).

Roughly 70% of the oil and gas reserves in the ground are owned by national oil companies such as Mexico's Pemex, and with crude prices near $90, the nationals will likely continue to receive favored treatment in lease auctions and drilling programs, potentially shutting out the publicly traded integrateds.

This is problematic, because national companies are notoriously inefficient at getting oil out of the ground. Maxwell predicts that non-OPEC countries will reach their maximum production capacity in 2008, with the infamous Hubbard's peak becoming a reality by 2014.

With global demand on the rise, we need every drop of oil we can get. Unfortunately, we won't be getting all we need from the nationalized concerns.

BP's recent deal with Husky Energy in the Canadian oil sands may represent increasing worries among the integrated giants that they are losing their foothold in territories such as Venezuela, Russia and Africa, where national firms hold sway, Maxwell says.