As news media and talking heads around the globe continue to struggle with the question of whether the worst is over or has it just begun, I believe it's important not to lose sight of the prevailing demands of the global economy.  While hundreds of thousands of people will have lost their job by the time all is said and done, this planet still runs predominantly on oil and gas.  And of course, there is a finite amount of oil and gas. 

The price of oil has plummeted from its frothy height of $143, down to $60, and has since stabilized somewhat.  Stocks within this sector took just as a harsh a beating, and most are trading at valuations not seen for years.

Let me bring you back to what happened nearly 40 years ago.  On a smaller scale, we had a crisisnot dissimilar to todays, in the 70s.  Mortgage debthad doubled between 1960-70.  Then the stock market crashed, losing nearly 40% of its valuefrom 1969-70. Hedge funds blew up. The top twenty eight funds lost 70% of their assets,and about 100 brokerage and financial firms disappeared - either via acquisitionor complete failure.  Does this not sound familiar?

Here's the best part.  The 1970s had two major oil price spikes.  The first occuring in 1973-74 and the second in 1979-80.  We've already had one oil spike recently, followed by a harsh correction.  If a second one arrives in the next few years, and evidence points to the affirmative, it could push prices through $200/barrel.

As the U.S. and the rest of the world take a break from their financial toys and go back to sheer industrial and consumer production, demand will once again push the price of the gooey black stuff upwards, and supply will continue to tighten.

Your Bottom Blog editor believes now is the time to start evaluating not only small to mid size producers with large oilfields on their books, but also companies that produce equipment required to make oilfields more efficient. 

One such company which recently crossed my desk is T-3 Energy Services (TTES-Nasdaq, $17.19).  With a 52-week high of $84 and low of $16, TTES has been knocked down to a P/E of only 6.7!  It has not traded this low since 2006, and they are in a position to capitalize as the industry get revamped.  TTES is considered to be a Small Cap having a market cap of only $215 million.  However when oil was at it's peak, TTES commanded a market cap of nearly a billion dollars.

Sifting through the oil and gas sector will quickly uncover several small and large cap companies worthy of your time and investment.  Range Resources (RRC) and PetroHawk (HK) are two that come to mind, both having massive reserves and rapidly growing production.

I am currently evaluating several junior companies with stable cash flow, large reserves and growing production; companies that will benefit the most when the price of oil resumes it's climb.

I will report on these companies in the Bottom Blog in the near future, so stay tuned.