(FORTUNE Magazine) – Richard Rainwater was trying to kick back and retire in 1996--really he was. The Texas investor and dealmaker, then 51, was not trying to make his next $400 million, or burnish his reputation as a seer, or make a statement about the virtues of fossil fuels vs. the perils of dot-com fools. It just turned out that way.

In the '70s and '80s, as the chief investment strategist for the Bass family, Rainwater earned a reputation as a contrarian while he dramatically grew the family's fortune. Then he swam against the current of conventional wisdom to become a billionaire himself in the '90s, investing in health care and real estate as others fled. Rainwater sees chaos and embraces it. He collects data from an odd melange of sources and makes out-of-the-box forecasts. His prescience is positively "eerie," says his wife, Darla Moore. Now he's done it again. At a time when the old economy seemed so over and the smart money swarmed into the new one, Rainwater put his money where his convictions lay--a mile under the ground, in oil.

It seems so obvious now, in these days of sticker shock at the gas pump, blackouts in California, and energy policy debates in Washington. Yet only 2 1/2 years ago, when oil fetched $12 a barrel on world markets and Internet companies fetched billions on the Nasdaq, the play looked dubious at best. Was Rainwater a contrarian or a crank? He proselytized to friends about an obscure 1992 book called Beyond the Limits, which used computer modeling to project that too much growth and too few resources would lead to earthly catastrophe (see box). What a hoot! A manifesto by some New Hampshire tree huggers persuaded a Texas capitalist to go long on oil.

For a while, you almost had to feel sorry for the guy. His energy bets were so far underwater that he needed an offshore drill rig to find them. (Fortunately, sort of, he had invested in an offshore drill rig company.) The man was down to his last billion. Worse, he was irrelevant. The Meekers had inherited the earth. Here was a very private man, publicly humiliated by a Business Week cover headlined BAD BETS. "I felt like a dinosaur--both of us did," says Moore, a onetime bankruptcy specialist whom FORTUNE called in 1997 "The Toughest Babe in Business." "I felt the world belonged to 12-year-old quant jocks, and I was a flippin' dinosaur. It was bad."

In 1999, though, bad turned to very good. The price of oil began to climb, eventually tripling from its trough. Rainwater's investments, ranging from oil and gasoline futures to independent oil producers' stocks, soared. In two years his net worth has risen 67%, to $2 billion, mostly because of the energy bets. Meanwhile, trillions of dollars' worth of Internet wealth has vanished. So who's sorry now?

Now, there's a line Rainwater himself would never utter. He at first declined to talk with FORTUNE about how he'd made so much money, saying it would only offend people who'd lost a lot. And he seemed to genuinely mean it. Rainwater is a gentle soul for a swashbuckling capitalist. He has the same pangs of doubt that we amateur investors do. When his energy stocks were in the tank, he sometimes rolled on the floor, moaning, "What have I done?" He's as proud of how many people he has mentored as he is of how many windfalls he has had. It was only in the name of mentoring FORTUNE readers, in fact, that he finally agreed to tell his story.

Here's what Richard Rainwater wants you to know. He's still on his Beyond the Limits soapbox, and he sees today's energy crunch as the harbinger of bigger, more difficult dilemmas. He doesn't believe we're doomed, as the book implies. But he does believe that the global spread of capitalism has hastened a day of reckoning. It has brought new energy demands and new competitors, more volatile business cycles and more powerful changes. Investors must look out for, and tap into, these world-altering economic and demographic changes.

He most vividly expressed this one afternoon at a rural Georgia racetrack, as he watched two turbocharged Nissans roar by far ahead of the pack. "That's what it's like," he shouted. "Your returns will look like these cars vs. all the others. And if you aren't aware of these forces, you might get hurt more than you think."

Rainwater is here to indulge a new passion: vintage auto racing. He owns a souped-up 1970 Camaro. A friend with professional racing experience drives it in a series of recreational races. Rainwater is heeding the deathbed advice of his father back in 1996: that he should recapture the passions of his youth (drag racing was one of them) and reexamine his fast-track existence. "Are you doing with your life what you want to do?" the 89-year-old man asked his son. "Because next thing you know, you'll be in bed like I am."

From then on, Rainwater considered himself retired. No more would he spend long hours in his Fort Worth office, moving from room to room, doing simultaneous deals with multiple parties. He turned over most of his Rainwater Inc. duties to his wife. He began playing golf and got down to an eight handicap. He flitted among four houses and, except for the weather, didn't much care which. "I live inside my head," he says.

But, of course, that was the whole problem with retirement: Rainwater couldn't stop thinking big thoughts about all sorts of things. He has always been eclectic with his investments, which is a major reason he is not better known. Warren Buffett is a value investor. John Malone is a cable investor. But how do you describe Rainwater's investment style? "Contrarian" is not an adequate description of his range. He got the Basses in on the ground floor of cell phones (Metro Mobile), the aftermath of Bhopal (Union Carbide), and the revival of Mickey Mouse (Disney). As a solo act, starting in 1986, he invested in hospital chains (Columbia/HCA), real estate (Crescent Realty), and just to prove he wasn't perfect, psychiatric hospitals (Magellan Health Services, which has floundered). The only common denominator was a fascination with how the world works. The truth is, Rainwater has always been a scientist masquerading as a capitalist.

In fact, he thought he was headed for a career in science when he majored in math and minored in physics at the University of Texas. But his older brother, a physicist, warned him away. Too narrow, said Walter Rainwater. Instead Richard went to business school at Stanford, where he learned that science and commerce had a common objective: discovery of the unknown. "It was like being in a laboratory studying things, then predicting an outcome," he recalls. "Then, unlike a scientist who simply writes a paper and gets a pat on the back, you get paid a lot of money for predicting in business."

So it was with some interest, one day early in his retirement, that he opened a copy of Beyond the Limits, sent to him by his friend Jack Byrne, the former CEO of Geico. "I got captured by this book because it was this ultimate quant-jock-oriented approach to looking at the really big picture," says Rainwater. It had statistics and charts galore, detailing trends and forecasting what exponential growth rates portended for the future. Along about page 66, when the book addressed nonrenewable resources, "I really started to get twitchy," he recalls.

According to Limits, world energy consumption grew 60-fold from 1860 to 1985. With 100 million people being added to the globe each year, the book predicted that demand would grow another 75% between 1989 and 2020. Coming to the subject in the mid-1990s, Rainwater saw developments the authors couldn't have known about when they were writing: Four billion people now lived in countries with some form of free enterprise, as opposed to 700 million before communism's fall. Those people were producing more, buying more, living longer. Rainwater figured that everything Limits calculated could only be accelerated. "I thought, 'If they just get a few things right, you don't need to know anything else.'"

Rainwater had already moved into natural gas by taking control of T. Boone Pickens' struggling Mesa in July 1996. Now Limits inspired him to think big about oil, although as usual he didn't rush right into it. When he's intrigued by a possible investment, Rainwater likes to check it out with academic experts; here, the authors of the book sufficed. Next he reads the reports of Wall Street's top analysts, in this case, Goldman Sachs' senior energy analyst Donald Textor, who had compiled data on world oil production nd demand. They showed, sure enough, that excess capacity had dwindled by more than half between 1988 and 1996, and was projected to fall 50% more by 2000. Finally Rainwater picks the best brains he can find in his target industry. With energy, he had some close at hand because of investments he'd made previously in Ensco International, an offshore drill rig company, and in Natural Gas Partners, which financed small companies in that field.

In early 1997 he was at last ready to take the plunge. Over the next two years he put $100 million into energy stocks and committed $200 million to oil and gasoline futures, some that extend until 2006. "We had all these people around the world wanting to live like Americans, and we had less and less spare capacity," says Rainwater. "So I was predicting that by 1999 or 2000 the world would awaken to this problem." He laid down markers on 20 independent U.S. oil producers. He also bought one larger independent, Parker & Parsley, and combined it with Mesa to create a company called Pioneer Natural Resources. His Crescent Realty real estate investment trust bought more than $1 billion of Houston real estate on Rainwater's reasoning that in a hydrocarbon-crazed age, Houston would be "capital of the world."

Then, per Rainwater's custom, he agonized. "He convinces himself about an investment through all the data and all the people he talks to," says Moore. "But then he makes the commitment and it's a roller coaster. If the wonder of him isn't recognized immediately, it's, 'Oh, my God, what have I done?'" Rainwater says his angst comes from being habitually early: "I'm never right on my timing. It's pitiful. Macro it's wonderful; micro it sucks."

This time he was wrong for a long time before he was right. The Asian economic crisis knocked the stuffing out of demand, cut the price of oil by more than half, and ravaged Rainwater's investments. He figured his net worth had fallen by $400 million at one point, and his stature as a savant was down incalculably; in the circles Rainwater and Moore traveled in, people were elbowing one another for a piece of the latest hot IPO and raving about their Net-stock moon shots. Nobody, but nobody, was talking about energy.

Rainwater reread his dog-eared copy of Limits. He kept rechecking world oil production, kept reviewing the situation. He convinced himself that he wasn't wrong--just early, as usual. He even kept proselytizing about energy to tech-infatuated friends and fellow investors, pressing copies of Beyond the Limits into their hands. He won few converts. "Most of the people I gave it to would say, 'That was a great read; thank you very much; now I've got to check my quarterly results,'" Rainwater recalls. The old-economy dinosaur kept pouring more money into his energy bets, adding to his positions even as they sank deeper into the tar pits. "Fortunately," says Moore, "we weren't managing other people's money, so we had the luxury of being able to wait it out."

It was only in March 1999, when OPEC restrained production, that oil prices firmed, and Rainwater's fretting stopped. As prices climbed through 1999 and 2000, so did the value of his investments. Counting the profits from his oil and gasoline futures, the gains from his stakes in the independent producers, and the increased value of his Pioneer Natural Resources and Ensco stock, he's up $400 million. There's $200 million more for his energy-related Crescent Realty holdings. And since he sees at least another decade in which energy will rule, he expects to make an additional $100 million to $300 million.

The fat times will get fatter if his former baseball partner George W. Bush--Mr. Outside in the old Texas Rangers ownership group to Rainwater's Mr. Money--enacts his drill-happy energy plan. Rainwater is neither an influence on White House energy policy nor giddy about the coming years. In fact, he thinks they may be kind of grim, more reminiscent of the stagflating '70s than the halcyon '90s. He predicts greater pressure on profit margins and increased competition from those new capitalist countries once content to be our customers. "America had the luxurious position of plundering the world. Now everyone is in the race for the same materials. This has ramifications that will transform your investment portfolio--for good if you get it right, for bad if you get it wrong," says Rainwater, who implores: Get to work! "All the information that used to be available to a limited province of people is now available to everybody."

Not one to stand pat, he's already thinking, What next? Dressed in a T-shirt and jeans, he takes Darla to a power lunch at Allison's Food Mart, a convenience store and eatery in her South Carolina hometown. He points to a boy walking by their booth. "Some day he'll want to communicate with people all over the world," says Rainwater. "The telecom industry has blown up. I'm trying to figure it out. I'm talking to experts. I'm talking to CEOs. I'm talking to investors. I'm reading all I can."

Oh, yeah, he's also bought one distressed telecom company's bonds for 40 cents on the dollar. He may never go much further, because, as in the technology sector he shunned, it's difficult to pick winners in such a complex and fast-moving industry. But his move constitutes fair notice as far as we're concerned. Listen up, investors. Richard Rainwater is thinking big thoughts again.

RESEARCH ASSOCIATE Doris Burke

FEEDBACK: jhelyar@fortunemail.com