How much for a barrel of oil?

PS.2 Enjoy this report and do not forget to see the Eastwood movie "hang
them high":

Czeschin's

Oil & Energy
Investment Report December 25, 2006
===================================================

Why pulling US troops out of Iraq
could wind up pushing oil prices
to $100 a barrel

The trouncing George Bush's party received at the
polls last month almost guarantees the United
States will soon start pulling its troops out of
Iraq.

A lot of investors realize that the US invasion
of Iraq is a key reason oil prices are still so
high today. What they don't realize is that
pulling US troops out of Iraq at this point in
time ... will send oil prices far higher.

I'm not saying US troops should or should not
withdraw. That's not my department. My job is
to make you money from what's going to happen.
And that's what this special flash alert is
all about.

Saudi Arabia -- not Iraq -- is the key to
understanding how pulling US troops out of Iraq
could send oil prices blasting up to US$100.
For the past 30 years, America has had a tacit
agreement with the Saudis: Saudi Arabia look to
the United States to protect it from its invasion
by external enemies.

America's quid pro quo: access to Saudi oil at
moderate prices. During both of America's
invasions of Iraq, for instance, the Saudis
stepped up oil production in order to offset
Iraqi production lost to the fighting.

But now things have changed. Saudi Arabia
warned the Bush White House against invading Iraq,
saying the removal of Saddam Hussein by force
would "solve one problem, only by creating
five more."


But America charged in anyway, and in so doing,
set 27 million Iraqis at each other's throats.
After 4 years of US occupation, the place has
become a hell-hole, with Sunnis and Shi'ites
slaughtering each other with appalling
enthusiasm.

But Iraqi Shi'ites have two powerful advantages
over the Sunnis. First, they outnumber them
almost 2:1. Second, they are amply supplied with
arms and ammunition from Iran. Indeed, the
Saudis believe the only thing keeping the
Shi'ite militias from pressing home their
advantage and conducting a wholesale "ethnic
cleansing" of Sunni Iraq ... is the presence of
US troops.

Withdraw US troops, and the way will be cleared
for ethnic blood-letting on a scale not seen
since the civilian massacres that followed the
break-up of Yugoslavia. And such a blood-letting
would immediately bring Saudi Arabia directly
into the conflict.

The Saudis have extensive communal and tribal
ties to Iraq's Sunni community. So, they could
not possibly stand idly by and watch their
kinsmen be exterminated. Indeed, King Abdullah
is already under enormous pressure to funnel as
much arms and support to Iraqi Sunnis as the
Shi'ites are already getting from Iran.

So far, the King has held off sending military
aid -- citing a promise to George Bush not to
send arms into Iraq that could wind up being
used by Sunni insurgents against US troops. But
if US troops were gone, this restraint would
vanish instantly.

Sending military aid to Iraq's
beleaguered Sunnis could easily lead
to war with Iran -- which the Saudis
would probably not survive

In addition to sending money, arms, and
ammunition to Iraqi Shi'ites, Iran has also
dispatched hundreds of "volunteers" to fight
alongside the Shi'ite militias. With the Saudis
supporting Iraqi Sunnis in equal measure, it's
only a matter of time until Iranian and Saudi
"volunteers" wind up shooting at each
other directly.

From that moment on, a de facto state of war
would exist between Saudi Arabia and Iran. For
either side, the death of soldiers at the hands
of the enemy in Iraq would be sufficient casus
belli for launching attacks directly on each
other's home territory.

Iran is vastly more powerful than Saudi Arabia.
It has a large, battle-tested army. And right
now, it's making a credible bid to dominate the
Persian Gulf. Iran's historical rival and chief
obstacle in the quest for regional dominance,
Iraq, now lies in ruins.

Iran has also been able to successfully project
power far beyond its borders.

** Its unwavering support of Iraqi
Shi'ites gives it effective control over
about a third of Iraq, home of the world's
third largest oil reserves.

** Through wholly owned subsidiaries,
Hezbollah and Hamas, Iran calls the shots
in Lebanon, and actually controls the
government of the Palestinian territories.

** The Iranians already have ballistic
missiles capable of hitting every city,
military base, or oilfield in the Mideast.
And now, it may soon have nuclear weapons.

By contrast, Saudi Arabia is a thinly populated,
desert kingdom that's largely incapable of
defending itself. So, the Saudis have good
reason to fear being dragged into a war with Iran.
It's a war they would almost certainly lose.

The weapon Saudi Arabia has
traditionally used against
Iran is sharply lower oil prices

The last time Saudi Arabia was this worried
about Iran was back in the mid-1980s -- when it
looked like Iran might win the Iran-Iraq war.
Saudi Arabia fought back by turning its oil taps
wide open, and flooding the market.

By 1986, the Saudis had brought oil prices all
the way down to US$10 a barrel. Iran, one of
OPEC's highest-cost producers, was nearly
strangled as a result. The plunge in oil revenues
made it impossible for Iran to hold on to its once
commanding position on the battlefield.

Today, the Saudis can no longer wield the weapon
of sharply lower oil prices. Their oilfields have
been producing for more than 35 years, and are now
well past their peak output years.

But if low oil prices are
no longer available as a weapon,
what about high oil prices?

Ask yourself this question: Do the Saudis really
need to produce the 9 million or so barrels a day
they're producing now?

In today's tight oil market, for example,
cutting output a mere 20% could easily force a
US$20 to US$40 jump in oil prices.

Even a US$20 increase in oil prices would
generate significantly MORE revenue than the
Saudis are earning now. They could use this extra
money to pay for their own intervention in Iraq.
Plus, the extra oil they kept in the ground would
be available for their children, and grandchildren,
to export -- at even higher prices in the future.

That's a pretty impressive collection of benefits.

Indeed, the ONLY thing that keeps the Saudis from
doing something like this ... is their tacit
understanding with the United States. And that
understanding would end if the US pulls its troops
out of Iraq and leaves Saudi Arabia alone to clean
up its mess.

In such an event, oil prices could jump to
triple-digits in a hurry. Indeed, this was the
message I believe US Vice President Dick Cheney was
summoned to Riyadh to receive 2 weeks ago.

The same people who said Saddam's
capture would bring peace to the
Mideast and lower oil prices now
say that pulling US troops out of
Iraq will do the same thing. They
were wrong then, and they're wrong now.

The present situation reminds me of back when
Saddam Hussein was finally apprehended by US
troops. Everybody from CNN to Washington, DC was
patting each other on the back, saying what a
great victory it was, that the resistance was now
finished, and that oil prices would soon be
coming back down.

Hogwash that. I worked through the night to rush
out a special issue telling subscribers far from
marking the end of the resistance, Saddam's capture
would usher in worse fighting in the months to
come. And so it has.

I also said there would be no downturn in oil
prices. Oil was trading for around US$32 a barrel
when Saddam emerged from his spider hole --
compared to US$61 and change right now.

The talk you hear today about the benefits
America will supposedly enjoy as soon as it pulls
its troops out of Iraq has the same hollow ring of
misplaced optimism -- as the celebration of
Saddam's capture.

"If you break it, you own it!" former US
Secretary of State Colin Powell famously warned his
colleagues in the Bush White House prior to the
invasion of Iraq.

Well, Iraq is certainly broken, perhaps beyond
repair. And America is stuck with it. Keep US
troops in, or pull them all out ... it really
doesn't matter all that much. Either way, Iraq
will continue coming apart at the seams. And oil
prices will only go higher. Next stop: US$100 a
barrel.

In my special issue on Saddam's capture, I urged
readers to load up on Apache Corp -- which then
doubled over the next 21 months. You may do even
better this time, with my new ...

#1 Recommendation: Anadarko Petroleum

Anadarko is sitting on even larger oil (and
natural gas) reserves than Apache -- currently
2.5 billion barrels. Logically, this means the
company gets US$250 million richer every time
oil prices go up one measly dollar.

If oil goes to US$100 (from US$62 as I write
this), these reserves are going to be worth at
least an extra US$9.5 billion (38 x 250 million).
And that's assuming Saudi Arabia and Iran don't
wind up going to war. If they do, your shares in
Anadarko could make you so much money it will
make your head spin.

The reason is simple. Every time there's a major
war in the Mideast, oil prices double or quadruple.
For instance ...

** War between Israel and its neighbors
quadrupled oil prices in 1973.

** War between Iran and Iraq quadrupled
oil prices again in 1979.

** The first Gulf War doubled oil prices
in 1991.

** The present US invasion and occupation
of Iraq has also more than doubled oil prices.

Actually, a war between Iran and Saudi Arabia
would probably send oil prices hurtling up a lot
higher than in any of these examples. That's
because we've never had a war between oil giants
who, all by themselves, account for 33.5% of the
entire world's reported petroleum reserves.

One further point: Anadarko's reserves are
located in the United States, the Gulf of Mexico,
Brazil, Indonesia, China, Sub-Saharan Africa, and
North Africa. In other words, thousands of miles
away from Iran, Saudi Arabia, and the whole
Mideast hornets' nest.

Any threat to Mideast oil sharply increases the
value of Anadarko's oil, simply because it's far
enough from the war zone to still be safely
harvested. In other words, Anadarko and its
shareholders are perfectly positioned to benefit
hugely the next time part of the Mideast goes up
in flames.


Anadarko is listed on the New York Stock
Exchange (trading symbol: APC; recent price:
US$42.14). For further information, contact the
company at: 1201 Lake Robbins Drive, The
Woodlands, TX 77380, USA; tel: 1-832-636-2306. Or
visit the company on the Worldwide Web at:
www.anadarko.com.

Anadarko is already in the Long-term Growth
Portfolio, so I won't make a separate entry to
reflect today's recommendation. Instead, I will
simply double the portfolio allocation percentage
from 5% to 10%. If you're new to O&E, and don't
yet have a position in Anadarko, now is certainly
a very good time to start putting one on.
Ditto for my ...

#2 Recommendation: Devon Energy

With reserves equal to 2.1 billion barrels, Devon
is sitting on almost as much oil and natural gas as
Anadarko Petroleum. In Devon's case, both 90% of
proven reserves and current production -- about
578,000 barrels per day -- are located in safe,
politically stable North America. The rest is in
Brazil, West Africa, Azerbaijan, and China -- all
very far away from the Mideast turmoil.

Like long-time O&E favorite Suncor, Devon also
has major operations in the oil sands of Northern
Canada -- where the amount of petroleum in the
ground is second only to Saudi Arabia in size.
Devon's first oil sands project is supposed to
begin production in 2007.

Getting oil out of the oil sands involves
heating it enough so that the oil flows, and the
most practical and economical fuel for this
purpose is natural gas. So, it's an advantage
that Devon is also a major natural gas producer.

Devon trades on the New York Stock Exchange
(trading symbol: DVN; recent price: US$68.11).
For further information, contact the company at:
20 N. Broadway, Oklahoma, OK 73102, USA;
tel: 1-405-235-3611, www.devonenergy.com.

New percentages for the O&E Long-term Growth
Portfolio: Schlumberger 10%, Areva 10%, Frontier
Oil 10%, Anadarko 10%, Ultra Petroleum 5%,
headwaters 5%, Apache 15%, Suncor 5%,
Transocean 10%, Devon 5%, cash 15%.

#3 Recommendation: A tiny penny oil
that just nailed down oil rights
to a huge territory in the middle
of one of the hottest oil
exploration areas on the planet

This little company has the potential to give
you a 2,857% return on your money. That's enough
to turn every $1,000 invested into as much as
$28,570. Every $5,000 invested into $142,000.

The company is a tiny outfit with red-hot
prospects smack dab in the middle of West
Africa -- one of the hottest oil exploration areas
on the planet. There have been 23 world-class
discoveries in this region during the last 6
years alone.

This company just nailed down oil rights to
106,000 square miles that span 7 of these rich
West African oilfields. 106,000 square miles is a
huge area -- you could put New Hampshire, Vermont,
Massachusetts, Rhode Island, and Connecticut
inside, and they'd still have plenty of room to
rattle around.

Seismic analysis and geothermal profiling
indicate that just the first of the 7 oilfields
could have as much as $24.9 BILLION of oil. That's
a huge amount of oil, but I think it's going to be
a pretty firm, or perhaps even conservative number.

I say that because two of the largest oil
companies in the world have already inspected this
company's property. As soon as they saw the data,
they wanted in on the deal.

One of the companies is Australia's largest oil
company, Woodside Petroleum. The other is the
Chinese oil giant, CNPC. These oil giants agreed
to pay ALL the drilling costs -- in return for a
modest share of the oil.

My colleague, Chuck de Castro, who specializes
in penny oils, is the one who found this company.
He conservatively expects its market cap to rise
to somewhere between 1/10th and 1/20th of its oil
in the ground.

This little company currently has
a market cap of $42 million. So, even
taking the more conservative figure,
you're talking about a rise from $42
million to about $1.2 billion. That's
the 28-fold increase I was talking about
in the beginning.

And Chuck, who is editor of the Penny Oil
Speculator, is one of the few analysts I know who
actually gets returns like these in real life.
Not quite as big, but comparable.

** He recommended Hurricane Hydrocarbons
at 56-cents a share and rode it all the way up
to $11.76 before he said "sell." This
is a penny share that could have given
you $20,800 for every $1,000 invested.

** Chuck also recommended Ultra Petroleum,
which rose from $1.89 to $37.85, when he
said to close out.



Likewise, Amadeus Petroleum, whose shares have
risen from 8-cents to $1.01, and Hardman Resources
which went from 8-cents to $1.64 after he
recommended it. So the huge profit potential
Chuck's been talking about with this penny oil
company is a real possibility.

Chuck has already recommended the shares to his
subscribers at 12.5-cents. The shares are now at
22-cents. But Chuck says,

"Don't let that discourage you. If this
company proves up these reserves," he says,
"you're talking about the possibility of
these shares rising 28 times from where
they are today.

"Every $100 you invest in this company
could turn into $2,857. Every $1,000
into $28,570."

I agree with Chuck. But as exciting as this
recommendation is, it simply doesn't work as a
recommendation in Oil & Energy. Like a lot of
micro-cap penny oils, this company's shares are
far too thinly traded to accommodate all 26,000
Oil & Energy subscribers.

If even a tenth of them tried to pile in at once,
the market would be overwhelmed, and nobody would
be able to get in at a fair price.

Situations like this are why I started Penny Oil
Speculator, and hired Chuck to write it. The
circulation is strictly limited to 1,000.

Special Offer to Oil & Energy subscribers
-- buy your first 6,800 shares on me!

A 6-month subscription to the Penny Oil
Speculator costs $2,600; no discount. I'll send
you -- as a free bonus -- Chuck's special report
on this tiny penny oil that just nailed down oil
rights to a huge territory in the middle of West
Africa -- one of the hottest oil exploration areas
on the planet.

A one-year subscription is normally
$5,000, but as a special discount for
Oil & Energy subscribers, on this offer
it's only $3,500 -- a $1,500 savings.
That's enough to buy your first 6,800
shares of the tiny penny oil I've been
talking about.

After this first recommendation, you'll see that
the guts of the service is an email/fax that Chuck
sends you about 4 to 6 times a month. You'll get
12 to 15 more red hot recommendations every year.

The issues aren't fancy: There's no time for
flashy charts and graphs. Half the time Chuck
bangs these issues out on his laptop, from the
back of an airplane or in some remote corner of
the world where the oil is.

And this Johnny-on-the-spot reporting pays off:
Hurricane Hydrocarbon was closed out with 1,980%
profits; another 1,902 profits closed out with
Ultra Petroleum.

With Amadeus Petroleum it was as much as 1,162%
profits. And Hardman Resources was just closed
out this month with a whopping 1,968% profits.
That could have turned every $1,000 invested into
as much as $19,680.

If you're interested in going after profits like
these with a portion of your portfolio, the little
gem with the huge territory that I've been telling
you about would be a great place to begin. Phone
Zack at 1-800-330-1435 or 1-843-388-8470.



Warm regards,


Bob Czeschin


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