It's pretty simple and not entirely how I'd hoped it would look, but I like it.
Materials:
-2 colors of worsted weight yarn-2 #2 pencils
Using the pencils as knitting needles, cast on 13 with both colors of yarn together (double-stranded knitting).
Rows 1-3: Knit
Row 4: Purl
Row 5: K1, YO, K2tog, K8, YO, K2tog
Row 6: Purl
Repeat rows 1-6 until the piece will wrap around a coffee cup (I tested this by grabbing one of the cardboard slips at Starbucks and knitting until it reached that length). When measuring, stretch it a little as it should be a little tight to hold onto the cup.
Knit one more row and cast off.
Sew together on each end and tuck in loose ends.
You now have pencil-knit your very own coffee cozy!