Gas & Oil Mutual Funds

Gas & Oil Mutual Funds:
Lookin' for Oil in All the Wrong Places
A Special Report for Dynamic Market Alert
July 21 , 2006
by Todd Schoenberger
Editor, Diligent Investor and American Capitalist


It seems every aspiring oil baron is attempting to create new forms of energy in order to save the world or, better yet, rid us of the almighty enemy: Arab oil. From farmers making ethanol in their coffee pots to some genius in West Virginia using urine as gasoline (folks, I'm not making this up), people are working on the next big solution to satisfy our global energy demands.

Well, guess what? We need oil and we will always need oil. It doesn't matter where the oil comes from: the Middle East, offshore or the Chesapeake Bay -- everybody needs it. And, because of that demand, oil prices will continue to rise over the long term.

Oil & Gas Mutual Funds: New Developments in Oil Exploration

There have been two recent developments over the past couple of weeks that may help with some of this demand, thus curtailing oil prices for a short time. One occurred from the U.S. House of Representatives when they voted 232-187 to life the ban on offshore drilling in U.S. waters, including Alaska.

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The Associated Press reported "The Interior Department estimates there are about 19 billion barrels of recoverable oil and 86 trillion cubic feet of natural gas beneath waters currently under drilling bans from New England to southern Alaska."

The offshore drilling will definitely help, but it may take years until Americans see any production from the offshore initiatives. Many state and local lawmakers across the United States see this vote as an environmental setback and are working on maintaining "protective zones" and restricting some offshore drilling near their own beaches. Considering the U.S. consumes some 20 million barrels of oil a day, tapping into a reserve of 1.9 billion will significantly help our domestic demands. Unfortunately, though, we will have to wait for this lifeline.

Gas & Oil from the Saudis

The second positive development appeared on the cover of today's Wall Street Journal as Saudi Arabia announced it is looking to unlock its huge, hard-to-tap reservoirs of heavy crude oil. This is excellent news, but again, may take years to develop. In order for explorers to extract the oil from the heavy crude, special - and very expensive -- technology is needed. Chevron is one company that is noted in the Journal article as testing exploration of heavy oil fields.

If the Saudis are successful, it will definitely make a dent in oil reserves by adding "tens of billions of barrels" to oil inventories around the world. Once again, this is a positive signal that governments and corporations are attempting to help increase supply while keeping up with oil demand. The problem, though, is we are several years from actually reaping the benefits of this new exploration.

Investors should look at oil companies specializing in exploration, pipelines and drilling equipment for the next 12 months to take advantage of the bull market in the oil/energy sector. We originally introduce you to the ProFunds Oil & Gas UltraSector Fund (ENPIX) back in May as a fantastic way to get exposure in a sector kicking out eye-popping revenues. Investors who took advantage of this recommendation have seen their investment grow 6%.

For a prospectus and more information on how to invest in the ProFunds Oil & Gas UltraSector Fund, contact ProFunds at (888) 776-3637, or for tax-deferred accounts, contact Ameritas at (800) 555-7746.

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Copyright 2006, The Taipan Group, LLC and Dynamic Market Alert, 808 St. Paul St., Baltimore, MD 21201
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