It's impossible to have a discussion about the price of a barrel of oil without considering the costs at the pump. Likewise, you can't talk about peak oil—the idea that we're using more oil than we're finding—without thinking about new discoveries.

Some hope came recently from South America as news arrived about a massive oil discovery off the coast of Brazil. Combined with that nation's aggressive alternative fuels policy, Brazil will move from net importer to energy independence to net exporter in only 50 years. But this story is the exception, not the rule. (To learn more, read Investor's Revenge: Get Rich on $150 Oil.)

So with oil recently cresting the $126 mark and fill-ups costing enough to almost require a second mortgage, we have to continue to explore the possibilities of other areas we haven't tapped before.

And I'm not talking about the Alaska National Wildlife Refuge.

Consider the 25,000-square-mile Bakken shale formation, an oil field that some believe contains as much as 200 billion to 500 billion barrels of crude. This area that runs across the northern Plains, along the border of Montana and North Dakota has become the latest area transformed by the promise of riches from black gold.

Recently, the U.S. Geological Survey (USGS) released a much-anticipated report about the amount of oil in the Bakken formation and called it the "largest 'continuous' oil accumulation ever assessed" by the agency.

In 1995, the USGS estimated the amount of recoverable oil at Bakken to be around 150 million barrels; the new study placed the recoverable reserves at 4.3 billion barrels using current technology. This means that the estimates increased by a factor of 25 since the previous government study—but I think this estimate is overly cautious. 

The 4.3 billion barrels of reserves is more than four times the second-largest continuous U.S. accumulation in the Austin chalk in Texas and Louisiana, which has 1 billion barrels that are technically recoverable. And the USGS Bakken reserves numbers are almost half the amount estimated to be in the Alaska National Wildlife Refuge—without all the controversy that comes with that particular parcel.

Advances in horizontal drilling methods will be the key to...