Dear Energy and Capital reader:

Across the border over Montana, into Canada, a monumental meeting is currently taking place.

At the Calgary Metropolitan Centre, the 3rd annual Canadian Oil Sands Summit is being held.

Remember that number... 3rd. The oil industry has been around for 150 years. The Canadian oil sands have been in production for decades. Yet, this is just the 3rd conference devoted to this "unconventional" source of oil.

That should tell you something.

The oil sands is still young. It's a virgin market for stock investors.

Last week, CIBC released a report stating that by 2010, the Canadian oil sands would become the most lucrative new oil in the world.

Stocks in this space have gone Great Guns! One stock in particular, Connacher Oil & Gas (CLL - TSX) broke to a 5-yr high yesterday at $4.66 a share. Now, Mike Schaefer recommended this stock last month for $3.83.

However, what you might not know is that Mike originally recommended Connacher in March '05 in his Pure Energy Report. His readers got in at $0.90 a share. At $4.66, that's a gain of 418%.

Outta here!

118% and 74% gains on the PetroQuest April 15 puts in an average of 15 days.
10% gains on only half of the United States Natural Gas stock in 11 days.
80% and 140% gains on United States Natural Gas April 2008 43 calls in an average of 13 days.
And a 102% gain on the second half of the Cree June 2008 25 calls in 51 days.

To find out how you can pocket similar gains, click here.

---

But here's the deal. These energy stocks, especially companies in the Canadian oil sands, are in the beginning phases of a long-term bull market. Think of it as the 3rd inning of a double-header.

If you don't have any portfolio exposure to the Canadian oil sands, you're missing out on one of - if not the biggest profit making opportunity since the tech boom.

Here's why...

As the oil price nudged above $66 a barrel yesterday on heightened concerns about disruption to supplies from Iran and Nigeria, a small group of geologists, economists and commodity traders was meeting in London to consider a more fundamental question: when will the world begin to run out of oil?

That moment is known as "peak oil" - the point at which oil production stops increasing and goes into irreversible decline. Some argue that we've already hit peak oil. We probably won't know for sure for another few years.

But regardless if it happened last year, happens this year or next, one thing is for certain: when peak oil does happen, its impact on the world economy - and the consumer lifestyles so many of us take for granted - will be profound.

Chris Skrebowski, the editor of the Energy Institute's Petroleum Review, believes peak oil will occur in 2008, at which point the world will move into "a land without maps where we are all likely to be poorer".

But other oil "pessimists" like Matthew Simmons and Kenneth Deffeyes think we've already reached peak. And if that's the case, oil will never reach the magical $25 a barrel again. Heck, you can kiss $45 a barrel goodbye... maybe even $50!

In fact, we're probably facing a price spike between $80 to $100 a barrel within the next 24 months.

You see, at present rates of depletion, 5 million barrels a day of new production will need to be brought on stream for the next 10 years just to keep world output rising.

To give you an idea of the monumental task at hand, the world needs to find the equivalent of 2 Saudi Arabia's in the next 10 years. It needs to find 3.6 Saudi Arabia's in the next 20 years. And this is just to keep pace with the increase in consumption.

When you calculate decline rates of existing producing oil fields, all bets are off.

London Calling

The following is from the UK's The Independent. It's an account from the London peak oil conference:

The peak oil debate tends to divide into two camps. On the one hand there are geologists who argue it is almost upon us or shortly will be, based on analyzing past production and discovery rates and field exhaustion and extrapolating into the future.

On the other there are economists, political scientists and the oil majors who believe that oil producers - be they governments or companies - will always find a way to meet demand, whether through cleverer ways of finding and extracting oil or greater fiscal incentives to discover and produce more.

Yesterday's conference in London, organized by the Dutch investment bank Insinger de Beaufort, represented both strands of opinion.

Mr. Skrebowski says that the world's big five oil majors all produced less in 2005 than they did in 2004, while North Sea oil production is declining so rapidly that it will halve in the next seven years.

According to the University of Reading's Dr. Roger Bentley, the secretary of the Association for the Study of Peak Oil & Gas, the evidence is irrefutable.

He points out that 64 of the world's 100 or so oil-producing countries are already past the point of peak production and on the downward slope. Although there may be a "mini-glut" as output is stepped up from Russia, the Caspian and Iraq and new sources come on stream such as deepwater oil and oilsands, the trend, he says is unmistakable.

Dr. Bentley believes that non-OPEC production will reach a peak within the next 30 months while global output will start to decline between 2010 and 2015 or 2020 at the latest depending on the contribution from non-conventional sources such as oilsands.

Dr. Jeremy Leggett, an oil industry geologist turned environmental campaigner turned chief executive of a solar energy company, paints an even more apocalyptic scene.

He believes that peak oil will occur some time this decade. That will not only produce "horrible economic pain" as oil prices rise to choke off demand but it will also precipitate environmental disaster as oil-consuming countries switch to coal and hasten global warming.

"The shortfall between current expectations of oil supply and actual availability will be such that neither gas, nor renewables, nor liquids from gas and coal, nor nuclear, nor any combination thereof will be able to plug the gap in time to head off economic trauma," he warns.

What is his evidence? Dr. Leggett points to the lessons of history. In 1956, the world-renowned geologist, M K Hubbert, predicted that US oil production would peak in 1971, much to the disbelief of almost everyone, including his employer Shell.

He turned out to be wrong - peak production occurred a year earlier in 1970. Using the same methodology, the "Hubbert curve" falls smoothly to this day, pointing to a peak sometime between 2005 and 2010. Despite the ingenuity of the oil industry in extracting oil from ever more hostile environments, it is, adds Dr. Leggett, a quarter of a century since the world discovered more oil in one year than it produced.

In 2000 there were 16 discoveries of giant fields containing 500 million barrels or more - in 2003 there were none.

The oil age is fast coming to a close.

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.

Follow the money trail. Sign up for Energy and Capital now.

Enter Your E-mail Address Below:

By signing up, you'll also get our latest report, The Truth About Oil.