Dear Energy & Capital Reader:

In the wake of yesterday’s assassination of Bhutto and the shocking drop in oil inventories, I was rushed into CNBC to talk about the oil markets and to give my price prediction for 2008.

You can watch the interview in its entirety here: http://www.cnbc.com/id/15840232?video=616244251&play=1 .

But even though I looked calm on television, I have a confession to make: I was nervous.

You see, for years I’ve been predicting that this day would come--the day oil hit $100 a barrel.

I think we’re weeks away from hitting that mark. But I also think we could hit $150 a barrel in 2008.

And that’s not the only milestone the oil markets will shatter next year. In 2008, the world will consume oil at a rate of more than 1,000 barrels per second.

According to the International Energy Agency (IEA), global oil demand will average 87.8 million barrels per day next year, up from 85.7 million in 2007. That’s an average consumption rate of 1,016 barrels per second.

If you need a visual of how much oil that is, take a look at our Peak Oil Clock .

Pretty startling, isn’t it?

You bet. I think we’ve hit the point of no return. And it’s about to get worse.

You see, the US is by far the world’s largest oil consumer, burning more than 7.5 billion barrels per year. We import two thirds of the oil we consume.

The world is consuming over 173 billion barrels of oil every two-and-a-half years. At the same time, we find enough new oil to replace 3% of that. So, just to stay even over the next decade, we’re going to have to find a few more Saudi Arabias.

As we saw yesterday, a terrorist attack is enough to send an already tight and nervous oil market higher.

But there is another fundamental force that will push the price of oil a lot higher, even without a catastrophe like the Bhutto assassination.

And that is - there’s no more cheap and abundant oil to be discovered.

Don’t take my word for it. Look at what’s happening within the oil industry.

A couple months ago, the financial news service Bloomberg reported on a crisis in Big Oil that’ll forever change the way you get and use energy.

According to Bloomberg, in as little as 16 years, companies like Exxon and ConocoPhillips may no longer exist.

Here’s a short excerpt from the report:

"There’s a steady liquidation of the world oil industry-- Exxon is buying back about $30 billion of its shares each year. If that continues, Exxon will have repurchased all its stock by about 2024."

In fact, the Big Five (Exxon, Chevron, BP, ConocoPhillips and Royal Dutch Shell) are spending more on stock buybacks than they are on finding new oil.

This raises the question: With oil trading near $100 a barrel and demand soaring, why aren’t these companies investing every penny they have exploring for more oil?

I think you know the answer.

As I said in yesterday’s interview on CNBC, I continue to be heavily invested in the Canadian oil sands for two reasons:

1) The Canadian oil sands will be the only place left on earth that’ll experience significant oil production growth--possibly 400% in the next decade.
2) Canada is protected from geopolitical risk. It’s a stable nation that’s right next door to the US.

In the coming days, we’re going to show you how to play the oil markets, specifically stocks we like in the Canadian oil sands.

I’m also going to tell you about a pricing anomaly currently in the oil markets that could earn you as much as $1,000 in pure profit every time the price of oil goes up $1 per barrel. I’ve worked closely with the market’s best traders—including Ian Cooper—to work out the technicals.

We’re calling it “The Trade of the Century.” And in the next few weeks, we’ll be releasing it to you.

Sincerely,

Brian Hicks

"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

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I have been out-of-pocket as of late because of the death of my mother Betty Crouch Crump Renick. She died December 19, 2007 from brain cancer. She did not want to die in a hospital hooked up to machines and tubes. We let her die at home. One of the many nights I sat up with her until dawn she would tell me one story after another about her grandparents, mother, father, brothers and sisters. All of them long gone. My mother was the baby of 10 children. Mother couldn't remember what happened 10 minutes ago but could remember when she was a little girl like it was yesterday. She told me many stories about her grandpa Tomas Jefferson Crouch and her grandma Mary Elizabeth Crouch who where were both children during the American Civil War. She told me of the day that Thomas Jefferson Crouch was buried. It was raining so hard and the roads were so muddy that the old cars couldn't get up the hills and hollows. Her daddy "Andrew Jackson Crump" and her brothers "laid old Thomas Jefferson out" which meant they washed him up, shaved him, combed his hair and put on his death gown. The built a strong pine box and put him in it. They hitched up their most reliable mule to the wagon and with Thomas Jefferson in the back started the 3 mile journey to the cemetery in a driving cold rain. It was 1936. My Mamma was sitting in her grandma's lap. Her grandma was too old to go the funeral and my mamma's mother Nancy Jane stayed home to take care of her daughter and her mother. The three of them watched out the window as the slow but sure mule pulled it's lifeless cargo down the muddy drive and slowly out of site. Sometimes my mother couldn't remember my name but could remember this experience and others that happend 71 yeas ago and how it broke her mother and grandma's heart. We are losing a generation. All of us alive today who personally knew people who were born and lived in the 1800's are dying off. That memory also dies. Thomas Jefferson Crouch never used much oil. What he used was what the old people called "coal-oil" for lamps. He never had electricity in his home, no central air, never had a truck,car or tractor. Yet he was a sccessful farmer who lived to have 11 children. They seemed to have been reasonably fed and all lived happy lives. He left behind a dying grandchild who loved him as much in 2007 as she did in 1936. It seems to me they lived happy lives because they had nothing to compare their lives with. Each decade that passed they had more and more net energy available for work and comfort. What will I tell my children? As the global energy sink starts to slowly drain.....what will my children remember 50 years from now? My children and I will have something to compare it with. It's called a declining standard of living. Although I never met him, I remember when old man "Babe" Renick passed away in 1958. He was my grandaddy's cousin and how much my grandad loved Babe's dad. It's was grandad's Great Uncle Jack who was a proud Confederate with Company I, 2nd Miss. Cav.... All these men lived without oil. We can live without oil. But the problem is, not all of us can because there are just too many people in the world. The other problem is we don't know how to live without oil and many of us will not want to.....if we can.....how many of use will be happy? We are leaving an age of abundance to a coming age of scarcity. What will someday disappear will be (1) personal mobility (2) choices and (3) convenience. What it will also change will be the deathbed stories told to children and grandchildren 70 years from now. Keith "Aramco" Renick, Peachtree City, Ga.

You should check your math. The world uses about 85 million barrels a day. 85 X 365 = 31 billion a year. 31 billion times 2.4 years = 74 billion. Not the 173 billion in your article.
I hope the resr of your work is a little bit more accurate than this.

Please do not promote the Oil Sands disaster-in-progress. Canadian Oil sands industry is destroying vast areas of Canadian forest in a filthy, polluting process which is a global- warming disaster to get oil from the sands. Investors can make as much or greater profits investing in renewables i.e. SOLAR!

I believe it is articles like this, and media hype like you sell, that promotes the ever higher oil and gas prices.
Your actions fuel the oil companies' "right" to ever increasing gas prices, no matter that the actual price of production of the product, probably hasn't changed in the past decade.
Pat yourself on the back, to know that you are part of the problem that plagues the people in our country, and creates their ever decreasing quality of life.
I hope the profits you make from the oil sands market helps you sleep at night.

Hello Brian;
Enjoyed your comments on the North OIl Sands i Alberta-Saskatchewnm.
There is no doubt internationally there will be shortage. Enjoy your comments and suggestions. Best regards for the new year.
Don Herd, Vancouver

Loads forever, never runs.


Dieter

Hey Brian Hicks, et.al.
Consider looking at the greenest house on the planet and invest in something concrete rather than playing your money games. Ever build anything?

Dear Sir

The overall prognosis expressed by you and others regarding oil may or may not be accurate but why do we consistently see incorrect multiplication? You've told us the world consumed c. 85.7m barrels of oil per day in 2007 which is c. 31.3bn per year -over 2.5 years that is about 78bn, not 173bn - unless I have missed something else! If the projected 2008 estimate of 87.8m per day is used this gives 32.05bn per year and 80.1bn over 2.5 years - Time and time again I see mistakes like this in such reports which serve only to confuse the reader and nullify your cause!

You never discuss the giant discovery offshore Brasil by Petrobras, and the new oil fields in the Arctic liberated by melting of ice, hungered after by Russia and other Arctic neighbors. You should comment instead of ignoring.

You say there is no geopolitical risk in Canadian oil, but you are wrong. The Canadian and Albertan governments have already, by their greedy tax measures, reduced the desire of developers to risk funds required for the exploration and extraction of Canadian oil. Politicians can and have destroyed whole industries in the past, and will continue to do so as long as humans exist.