In case you couldn’t tell from the $4-a-gallon gasoline prices in your area, oil prices have been on the move. $80 per barrel, $90, $100… All have been sped past like interstate mile markers.

The chart below pretty much says it all.

As you can see, benchmark West Texas Intermediate Crude has been bubbling higher lately, with prices being now ascended into triple-digit territory. That’s an impressive 200%-plus bounce off the lows from January 2009.

There are compelling reasons to believe these elevated prices might stick around for a while. In fact, further appreciation to the $150 level is a distinct possibility. That could act as an economic drag, siphoning money from consumers and sparking inflationary price hikes.

But on the other hand, $150-a-barrel oil can be a gale-force tailwind for energy investors. [Note: My colleague Andy Obermueller is with me in calling for higher prices. He recently discussed the situation in his article “Prediction: Oil Hits $200 and These 4 Things Happen.”]

No margin for error
As you probably know, the sharp run-up in oil buying we’ve seen recently is in direct response to the geopolitical turmoil in Libya. According to the International Energy Agency, Libya is Africa’s third-largest oil exporter. Deadly clashes have cut the nation’s oil output by half, taking 850,000 barrels out of production per day.

And this is hardly an isolated trouble-spot in the unstable region. In fact, we’ve already seen vocal political protests break out in Bahrain, Oman and Tunisia. And Algeria, another key producer, even declared a state of emergency at one point.

Libya and other OPEC members in the Middle East and North Africa (MENA) produce 34 million barrels of oil a day and represent three-quarters of the world’s reserves — so it’s not surprising that escalating tensions in the region have rattled the markets and sent crude prices soaring.

I don’t think we’ve seen the end of these uprisings just yet. But it doesn’t take a violent coup in the Persian Gulf or tanker traffic threats in the Suez Canal to spook investors and lift prices at this point.

Even before these flare-ups, oil was climbing because of a simple leak in the Trans-Alaska Pipeline. Before that, it was a tropical storm in Mexico. The fact is, any disruption can unsettle the market because we simply don’t have a drop of oil to spare.

The Unites States alone consumes about 20 million barrels of oil every day. China’s appetite grows more ravenous by the minute, with daily consumption doubling from 5.5 million barrels in 2003 to nearly 10 million this year.

Aside from a brief downturn during the recession, global oil consumption is moving inexorably higher.

As you can see, worldwide oil consumption rose 2.4 million barrels a day in 2010 — the second steepest growth rate in 30 years. And it is projected to reach 88.2 million barrels per day this year. Meanwhile, the world’s oil companies will only produce 87.7 million barrels a day.

In other words, demand will outstrip supply by 500,000 barrels per day.

As it stands, we can barely feed our appetite today. And we’re getting hungrier. Per-capita consumption in China and India is still less than one-tenth that of the United States.

These growing middle-classes are catching up fast. In fact, 18 million new cars hit the road in China last year — about 50,000 a day — stretching supplies even thinner.   
 
Meanwhile, most production grounds have been in a steady decline for decades. Future oil exploration activity will be focused in deep offshore basins, which are expensive to tap (meaning drilling and production will halt if prices retreat and recovery becomes uneconomical).

The biggest winners
I think prices are headed higher. But even if oil stabilizes at this level, we could still be seeing blowout profits for many companies — enough to buy back shares, raise dividends, and plow surplus cash into expansion projects to support future growth.

There will be many beneficiaries: offshore drillers, equipment and service providers, even the green energy sector (which always attracts interest when high oil prices become oppressive).

But most of the wealth will accrue to the companies pulling the stuff out of the ground. Still, you can’t just invest blindly.

Some companies may have already locked in most of their production at lower prices through hedging and won’t feel the full impact. And integrated giants like ExxonMobil (NYSE: XOM) won’t yield the greatest returns either, because high oil typically crimps refining profits.

Action to Take –> Look for smaller companies with no distractions and an earnings needle that can be easily moved by $150 oil. These smaller explorers and producers have the most to gain with these higher prices.

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