Hello Rogue Investors,

Because it has been getting a lot of press lately, I want to focus on one thing in this newsletter:

I am a geologist by trade. However, when I graduated with a B.S. in geology in 1985, I had little to cheer about. Oil prices had reached a peak several years before and no one was hiring.

Fortunately, I never planned on working for an oil company. So instead of begging for a job, I went to graduate school and obtained a Master's degree in hydrogeology, the branch of geology that deals with groundwater flow.

For the next decade, this proved to be a wise career choice. With oil selling for $10 to $20 per barrel, almost no oil jobs could be found. Many of my friends from college who had been lucky enough to land the few oil jobs that could be found in the mid 1980s got laid off over the next 10 years. The mass exodus of employment opportunities for the petroleum industry during this time period was catastrophic for the entire industry.

However, a funny thing happened during those years. Demand increased across the entire world, but few oil wells were drilled and even fewer new reserves were found. Most companies came to the same conclusion. Why explore for oil when the costs of exploration were not covered by the low price paid for oil?

In the year 1999, I started to notice that oil prices were beginning to stabilize. Although the economy started slipping into a recession during the next year, oil prices did not tank. I also started to read articles about how China, India and other once less developed countries were starting to use large amounts of oil.

Then, at the end of 2000, when Bush became President, I thought it was a lock that oil prices would rise. But to my surprise, not much happened over the next two years. As I waited, I spent most of my time researching health care investing opportunities. Although I still believe health care will be the single biggest investing opportunity over the next 15 to 20 years, I was also looking for something that would be big over the next 5 to 10 years.

When the Iraq war started, oil prices jumped up as expected. However, what has happened since then is what has gotten my attention. Instead of stabilizing, oil prices have continued to rise, hitting new highs, sometimes without major news events.

Although things have settled down a little bit, oil prices are still well above $40 per barrel, almost double what they were just a few years ago. Everyone also seems complacent about the new prices, accepting what has happened.

This appears like the beginning of a bull market in oil to me. There is a theory in the oil industry: "Oil prices move in 17 to 20 year cycles." Going back in time, 1983 was the peak of the last cycle of higher oil prices. According to this theory, we are now in a 17- to 20-year cycle of high oil prices.

Here are some reasons that lead me to believe that oil prices are going to stay high and possibly move higher:

Demand is picking up across the world. Historically, only a few industrialized countries used most of the oil in the world. Now, many countries are industrialized and demand for oil is growing faster than inflation. Every 12 days the world uses one billion barrels of oil. This means that over the next four years, about 100 billion barrels of oil will be consumed. At this rate, it is possible that most of the proven oil reserves of the entire world could be used up in 25 to 50 years.

Oil did not keep up with inflation during the 1980s and 1990s. Believe it or not, at $50 per barrel, oil is still cheap compared to most other products. This is because oil did not rise in price hardly at all from the time period 1985 to 2000. Some rise in oil prices is expected, since labor costs rose substantially over the last 20 years. From an inflationary standpoint, if oil prices stayed at $50 per barrel, it would not represent an abnormal price increase over a long time period.

Turmoil in the Middle East will continue and possibly worsen. Given the current scenario, it is unlikely this area will settle down for a long while. Unfortunately, this is also where more than 50 percent of the proven world oil reserves are located. Any more disintegration in this area and oil prices could spike much higher over short time periods.

Should you panic?

No.

While price spikes and gas shortages may be in the offing before it is all under control, humans have shown an amazing ability to find alternatives when oil prices get extremely high. But this period of innovation usually takes time. I am expecting high oil prices for the next 5 to 10 years and then innovations will start to appear, eventually stabilizing the price of oil.

So why should you care?

If oil prices continue to remain high, there is an interesting investing opportunity that warms the heart of every geologist. Alberta, Canada is home to a geologic phenomenon that could prove very valuable. Long considered worthless, vast deposits of tar sands are located in Alberta. These tar sands contains enough oil to rival the Saudis (over 200 billion barrels), but until recently no one could economically extract the oil out of these sands, especially with oil selling for less than $20 per barrel. This is because you must mine tar sands, because the oil is too viscous to pump. When the world oil reserves are tallied, usually these tar sands are not even included in the estimates.

However, one company, Suncor (SU), has never given up on these deposits and it has gradually become the expert on how to profitably get oil out of these tar sands. Suncor can economically mine these tax sands for about $20 per barrel, so with oil at $40 to $50 per barrel, Suncor makes a lot of money. For an oil company, their market cap of about 15 billion dollars is small (Exxon has a market cap of over 300 billion dollars), but their tar sand oil reserves rank in the billions of barrels. Considering the vast nature of the tar sand deposits in Alberta, Suncor also has the option of leasing more tar sand acreage in the future. If oil prices stay where they are at now, this company is 50% to 75% undervalued.

Although due to the volatility of oil prices I would not recommend that anyone invest in this company unless they can stomach some risk, Suncor looks like a interesting play during an oil shortage.

Next, I want to discuss several new real estate investing experts who have agreed to speak at the 2005 National Real Estate Investing Expo we are hosting. Should you decide to come to Las Vegas in February 2005, I think you will find both of these individuals worthy of your time.

First, Albert Koopman, a world-renowned author and business expert, is going to speak at the Expo about International Real Estate Trends and Investing. Albert's books, including Transcultural Management, have been required reading at many graduate business schools, and Albert is currently spending most of his time in China, where a boom in business and real estate activity is underway. Albert is a true leader and visionary who has spellbound audiences many times. If you are looking for a real estate investing crystal ball, Albert is probably the best person to help you visualize what would be swirling inside.

Second, Greg Habstritt, a highly successful entrepreneur and real estate investor, will address the very important topic of Real Estate Investor Psychology. Greg has already built and sold several successful businesses and owns many real estate properties in Canada. Maintaining your mental focus is one of the top skills in real estate investing, especially when you are bidding at tax sales and your emotions start to run wild. When I recently went to Seattle, I had the opportunity to see Greg in action and I am convinced you will not leave this talk without rethinking some of your investment strategies, even if you are a seasoned veteran.

This is just a small sample of the talent that is coming to this Expo.

I told you last time that the 2005 National Real Estate Investing Expo in Las Vegas on February 24, 25 and 26 would have 25 real estate investing experts. I actually think the number of experts is going to be closer to 30. That means if you sign up by December 31, 2004, your cost to attend of $67 is going to be just a little over $2 per expert.

If you haven't signed up already, I encourage you to think about it. Here is the link to get your 65% discount, but you must sign up by December 31, 2004:

2005 National Real Estate Investing Expo

Based on your suggestions, we are also going to offer evening seminars. After a break, real estate investing experts will continue to fill your brains with knowledge until 8:30 p.m. on Thursday, Friday and Saturday.

Finally, a hospitality room awaits all Rogue Investors who choose to attend. When you come out to the Expo, I encourage you to come to the Rogue Investor Suite where you can hang out and meet the entire Rogue Investor Team.

Happy Holidays,

Bryan Rundell