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Oil and Gas Prices

It's All About the O: Oil

Written by Luke Burgess
Posted August 22, 2005

Dear Wealth Daily reader:

I flew to Chicago over the weekend for a bachelor party. And while I'd love to give you all the dirty details of Saturday night's exploits, I'm afraid that the information could "get into the wrong hands," if you know what I mean.

In any case, as I was waiting at O'Hare for my flight to arrive, my eyes, bloodshot and half closed, my head pounding, the taste of cheap alcohol in my mouth, and the stench of cigarettes and strippers lingering on my clothes, a headline on the Chicago Tribune caught my eye. The headline read: "Good news about high gas prices."

Good news? Was there anyway I was passing this one up? No way.

The article explained how the current oil prices will not be sustained because global demand has fallen short of predictions this year and inventories have been expanding in the U.S.

The author went on to call peak oil theorists "alarmists." Alarmists we are not. Try realists, my friend.

It was a typical puff piece, breathlessly written by some party-line hack without the slightest clue regarding his subject matter, other than it's what he buys at the gas station.

He didn't even bother to check fact check his sources versus the official EIA data. In a stunning display of his deductive reasoning skills, the author offered this explanation for high gas prices:

"Gas prices are high because crude oil has been selling for upward of $60 a barrel."

Conversely, Kenneth S. Deffeyes, former Princeton professor and author of the best selling book, "Hubbert's Peak," said in a discussion on peak oil, "It's the five-year time scale that I'm really scared about….War, famine, pestilence and death. We've got to get the warning out."

Deffeyes says the peak is very near. Possibly in November, and could bring humankind to the brink.

Personally I have to agree with the man who knows the industry in and out. Deffeyes has devoted his life to the study of oil production and is one of the world's leading peak oil experts.

Oil prices are high now, but they're going higher ahead of the winter.

"War, famine, pestilence and death. We've got to get the warning out."

-Kenneth S. Deffeyes


The summer may be the driving for season for Americans, but don't expect the cooler weather in autumn to bring an end to your gasoline woes.

Prices at the gas pump will stay high and record heating bills in the winter are almost certain to follow.

The Department of Energy predicts that heating costs for households using natural gas or fuel oil could be up to 25 percent higher than last year. And that estimate came before the latest price spike in crude oil and natural gas.

Drivers are reeling from gasoline prices that are approaching $3 a gallon in some areas and averaging $2.55 a gallon nationwide.

We know all about the problems, but what about a solution?

Oil Shock Insurance
If you're positioned properly, high oil prices shouldn't be a concern for you. To the contrary, they'll become a delight.

As a Wealth Daily reader you already know we've been at the forefront of the rally in oil & gas.

You're also familiar with some of our picks in the sector, like Storm Cat Energy. "The big Cat" has already been a huge winner for us, will continue to rack up gains as the company's projects evolve.

That's how the game works. Get in front of the trend with the best companies, with the highest leverage, and ride the wave.

The profits we've enjoyed in the sector came about as a result of recommendations specifically designed to profit in the era of oil depletion.

The concept, while complex, is simple on its face.

There are over 3 billion people who, over the next several decades, will emerge from poverty and climb their way up to a better lifestyle. These people will demand an incredible amount of resources: at the very same time those resources are declining.

As a result, we'll see oil prices continually reach record highs. The days of inexpensive oil are over, plain and simple.

What we'll witness will be an oil and energy shock of historic magnitude. For us, it will truly be the investment event of a generation, as companies with large reserves and exceptional development potential, will become good as gold.

For those left behind, however, the oil shock will be a painful time of cutbacks, belt tightening, and a resulting decrease in living standards. Things could truly become difficult, both personally and financially.

That's why we've come up with what we call "Oil Shock Insurance."

It's a basket of stocks and investments designed to prosper in the era of oil depletion. And, most likely, this insurance portfolio will sky rocket, while many other investments will wither.

The companies in our Oil Shock Insurance portfolio are all top-shelf oil and gas companies, with a few other ultra-safe investments to protect you against potentially volatile times ahead.

It's the perfect strategy, at the perfect time. I'll be talking more about Oil Shock Insurance in the coming days, and we'll have a full-blown report available for you within the next two weeks.

Be sure to keep an eye out for it.

Every large oil consuming nation has its own version of oil shock insurance going.

With peak oil breathing down their necks, countries around the world have begun scrambling to secure energy stability.

Several weeks ago Chinese oil company, CNOOC Ltd. placed a multibillion-dollar bid for U.S. oil and gas producer Unocal Corp. Fortunately the bid didn't go through as opposition by critics who said it might threaten U.S. national security.

But Chinese state-owned companies have signed a multibillion-dollar string of deals in recent months to develop oil and gas fields and buy fuel supplies from countries as far-flung as Sudan, Venezuela and Australia.

And they continue...

Feeding the Monster: PetroKazakhstan Accepts $4.2 Billion in Chinese Takeover
Today China National Petroleum Corporation, China's biggest state-owned oil company, said the board of directors of PetroKazakhstan, a Canadian company that is a major oil producer in China's neighboring Kazakhstan, has accepted a $4.2 billion takeover offer.

The takeover still must be approved by PetroKazakhstan shareholders.

If approved the takeover would add to a series of foreign oil and gas acquisitions that Beijing hopes will secure energy supplies for its booming economy.

It's only a matter of time before China becomes the largest economy in the world, eclipsing the US. No, it's not going to happen tomorrow, but it will happen during the lifetime of most of you now reading this.

Do you speak Chinese yet? Let me give you a head start: Translated in English: Yes, my communist master.

In all seriousness, investment legend Jimmy Rogers has made sure his two year old daughter had a steady exposure to Mandarin Chinese since birth. He's been there, and seen what's on the horizon.

Power Cut Shuts Down Iraq Oil Exports
At last look crude topped off at $66.45 today as Iraq's oil exporting operations were shut down by a blackout that darkened parts of central and southern Iraq.

Officials have said that sabotage was responsible for today's power cut, which prevented oil from being pumped into tankers waiting at berths.

Exports from the northern oil fields around Kirkuk have long been interrupted due to sabotage on the pipelines.

The shutdown, which costs Iraq some $4.25 million per hour, will probably push up the price of oil even higher.

After seven hours without power, officials estimated the loss of an average of 65,000 barrels per hour at $29.5 million.

It's a painful fact that the largest pool of remaining oil lies squarely in the most unstable region of the planet.

Another reason to be bullish on oil.

- Luke Burgess
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