Jim Jubak’s 8/26 article focuses on the falling production of the major oil producers and is bullish on the long term trend in oil prices because of the mismatch between rising demand and falling production:

The big Western oil companies have been locked out of the most promising areas in the world for oil exploration. It’s not just that these companies control only 13% of today’s oil production — down from 50% or more in the 1970s — but that they have so little access to the most promising areas for future production.

National oil companies in countries such as Russia, Iran, Saudi Arabia and Venezuela control access to roughly 80% of the world’s existing and probable oil reserves. And that percentage is rising as more countries move to take back or reduce exploration and production agreements signed with the international oil majors.

There are three ways he proposes investing in this trend: 1) Smaller oil and natural-gas companies that are showing big increases in production now and that have announced substantial discoveries that will go into production in the next decade. Names he includes, DVN, UPL, CHK, and APA. 2) National oil companies with the world-class technology to exploit the next generation of difficult geologies. There are really only two names here, PBR and STO. 3) The “pick-and-shovel” companies that supply drilling pipe, fittings, deep-sea drilling rigs, and oil-exploration and field-management services. The three names here, SLB, RIG, and NOV.

As of Aug. 26, he’s adding PBR to Jubak’s Picks with a target price of $85 a share by March.

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