Fundamentally we know that the world thirst for oil is going up. It will continue to go up in the future because the strongly growing economies of India and China will drive that price up.
An earlier Seeking Alpha article noted that India and China both consume less than 2 barrels of oil per person per year. The U.S. consumes approximately 26. The Western European countries and other developed countries consume 13-15 barrels per person per year.
Furthermore both China and India are subsidizing the price of oil for their citizens. Increased usage by these quickly growing economies seems certain. If China's and India's use goes up by just one barrel per person, this will have a huge impact on the global supply of oil. They both have huge populations. The price will rise with the increased demand.
This all seems virtually inevitable now. In the long term, alternate forms of energy seem to be the solution. However, in the short term the world is stuck with oil as a staple. Since the world will not change quickly away from oil, what else can it do? The answer is simple, it must produce more.
How can it do this? The land based oil fields seem to have been tapped to a large extent. The new "land based" discoveries that are made do not even seem to keep pace with the "land based" fields that are expiring. The most promising fields these days seem to be the sea or ocean based fields. Prominent discoveries have been made in the Gulf of Mexico, off Brazil's coast (the Tupi and other fields), in the China Sea, off Malaysia and Indonesia, in the North Sea, etc. This means the short term solution (i.e. for the next 5-10 years at least) is deep sea drilling for oil.
Three excellent companies in this area are Transocean (RIG), Diamond Offshore Drilling (DO) and Noble (NE). They all have good numbers
As you can see while the price of oil has risen from about $100 to $130+ (or about 30%), the price of the stocks that drill for this oil has not risen. Actually the prices went down with the market. Then these stocks generally recouped their losses as the market recovered.
If you look at the chart patterns you can see these stocks have been consolidating recently. Oil prices will likely push higher over the summer. It is hurricane season. It seems that the above stocks are about to break out of their consolidation phase due to the already considerable drag of oil prices. If oil prices go up still further this summer, these stocks should skyrocket. In the past these stocks have risen as oil prices have risen. There is no reason to expect that pattern to break.
Already RIG, NE, and DO seem primed to explode (i.e. without any further increase in the price of oil). A 30% difference in the price growth of oil versus the price growth of these stocks puts me in mind of a tightly drawn rubberband. It looks like this rubberband is currently being released. It should propel these stocks much higher.
... With the obvious world demand for quick deep sea oil field development, this bigger RIG may be ideally positioned to take advantage of this demand. It is a big buy.
http://seekingalpha.com/article/81813-these-three-deep-sea-drillers-look-like-a-bargain