Oil is becoming much more global, much more expensive, much more chaotic, yet far less plentiful--all at the same time.

This presents many interesting, exciting and profitable possibilities for all players, including serious, business-minded AMSOIL Dealers.

There are five key issues involved:

Issue #1. Global Oil Supply Is Shrinking And Global Oil Demand Is Soaring. This Will Not Change Any Time Soon.

Issue #2. Energy Investments Are More Attractive Than Ever.

Issue #3. China Changes Everything.

Issue #4. Massive Changes And Innovations Can Solve These Challenges.

Issue #5. AMSOIL Dealers Have To Change, Grow, And Keep Winning!


Issue #1. Global Oil Supply Is Shrinking And Global Oil Demand Is Soaring. This Will Not Change Any Time Soon.

The USA produced only 15 billion barrels of oil in the last five years. Yet we've consumed 135 billion barrels during the same time.

That's not exactly the formula to "lessen our dependence on foreign oil."

We have only 2% of global oil reserves, but we use 25% of the world's oil.

Iran and Iraq have an estimated 112.5 and 90 billion barrels underground, respectively.

Since Iraq is a slaughterhouse in turmoil, and Iran's new President is decidedly anti-American, we cannot count on these nations.

Libya has at least 29.5 billion barrels of oil--plus 46.3 trillion cubic feet of gas reserves. Libya is reopening to the rest of the world after more than 20 years of estrangement.

The United States has resumed diplomatic contact. So, Libya may be somewhat useful to us and other nations as an energy supplier.

Saudi Arabia has been a huge supplier, but some believe that their reserves are almost depleted, and many distrust Saudi estimates of remaining crude oil.

Political instability could lead to the overthrow the House of Saud, with this friendly nation becoming our enemy. As a long term oil supplier, the Saudis are uncertain at best.

Issue #2. Energy Investments Are More Attractive Than Ever.

Wall Street “Changewave” guru Toby Smith includes six energy investment categories out of a total of 11 categories targeted to make the most serious money for the rest of 2005. Six categories represent an increase for energy-related investments, compared to his initial 2005 recommendations.

The six are: onshore/offshore drilling, unconventional drilling places (such as tar sands oil extraction), hybrid autos, energy trusts, nuclear energy and uranium, and “met” coal (the kind used to make steel). Investing in these categories also includes investing in their suppliers--example, battery vendors for hybrid cars--and other firms likely to benefit from success of these companies.

Investors already make lots of money on the energy situation. Each day, stock markets react spastically to crude oil price swings. Following the money trail is always the best way to know what’s really happening in business. The money trail in 2005 decidedly leads to energy, particularly oil-related investments.

Issue #3. China Changes Everything.

As this is being written, China National Offshore Oil Corportation (CNOOC) is attempting to acquire Unocal. This is a sound business deal and does not pose a threat to US national security, even though the Chinese government is majority owner of CNOOC.

Thanks to the United States trade deficit, China holds at least $700 billion in U.S. dollars, and it makes sense for them to invest some of this back in the United States into higher yielding assets like Unocal rather than our U.S. Treasury securities.

Certain members of Congress have been critical of this possible merger, but remember that many of them have received legal campaign contributions in the past from Chevron/Texaco, the company competing with CNOOC to buy Unocal. One wonders, then, whose interest is involved in their comments: the national interest or their interest in their own re-election campaigns?

Chevron/Texaco’s price earnings (P/E) ratio of 9.25 is below the industry average (12.22) and below that of Exxon Mobil, Unocal, British Petroleum, and CNOOC--all in the 13.3 to 13.8 P/E range.

A P/E ratio compares stock price (determined by buyers) to the company’s earnings. The higher the P/E ratio, the better for the company.

A P/E of 13 means that investors are willing to pay $13 per share of stock for each dollar of profit the company earned. A normal P/E range for large corporations is 6 to 31 with an average of 28.

It’s credible to believe that Chevron-Texaco may see this merger as an opportunity to increase its P/E. Clearly, the oil companies have a long way to go to improve their P/E ratios, having P/E’s of only 13.3 to 13.8. They must increase investor perception of their stock price value to increase P/E ratios.

Being upstaged by CNOOC at home does not help to increase investor perceptions of value of American oil stocks.

These large oil companies have high Return on Equity (ROE) ratios. That means their profits compared to their equity are high (28 to 29 range). These companies have little likelihood of increasing ROE via higher earnings, since these are very high ROE ratios for any business.

During the last year, the major oil companies have experienced significant, quick increases in their share prices. Many investors have taken these profits and now prefer to create a diverse portfolio of smaller, fast-rising energy stocks, creating their own “virtual Exxon” of investments.

These large oil companies resulted from mega-mergers, and their profit increases have come from increased internal efficiency by consolidations and cost-cutting. Exxon Mobil has done this best. Crude oil prices keep soaring and profit improvement opportunities will not last forever.

Oil company management is running out of strategies for further profit improvement while, at the same time, needing to increase the investor perceived value of their stocks.

Meanwhile, the investment world watches Chinese CNOOC and other Chinese oils companies like China Petroleum & Chemical Corporation (Sinopec) with interest, taking the large American oil companies for granted as investments at this point.

China is investing $2.0 billion to build a oil pipeline from Alberta to the west coast of Canada to be shipped to Sinopec in Shanghai. We cannot assume that the abundant Canadian “oil sands” output automatically will come to us, since we are both North American nations and neighbors.

China invests heavily in new oil drilling, now doing a large project in the South China Sea and many other projects worldwide. For the last few years, China has made bilateral deals with numerous nations worldwide--not only in oil and energy, but things needed to build a modern national infrastructure (coal, cement, aluminium, steel, etc.).

China’s 1.3 billion population seeks economic freedom and middle class lifestyle status and its government seeks global superpower status. Like any other people, Chinese want nice homes, good cars, consumer electronics, etc.

The “middle class” population is estimated at 19% of its 1.3 billion population or 274 million people. By 2020, some 15 years from now, one estimate shows that 40% will be “middle class” in China, as China becomes more urbanized and educated.

China is not a sleeping giant, a Maoist communist gulag, or a nation of rice paddy people. The wealthy and middle class require oil, just as much as we do.

India with a population in the 1.0 billion range has 300 million middle class citizens, also demanding oil and everything else middle class people desire and acquire.

Meanwhile, the United States government has been sound asleep on energy issues, assuming the continued supply of abundant, inexpensive oil. But oil is now about $60 per barrel, $25 higher than last year. Some future estimates are $80 to $150 per barrel within a year. If so, gasoline in the $5.00 to $6.00 per gallon range is likely for a very long time.

China will be one of two global superpowers--along with the United States. Since the Soviet Union collapsed, we’ve been the only world superpower. The Soviets were a military superpower, but feeble economic competitors. China will be our first real economic superpower competitor in more than 100 years.

Issue #4. Massive Changes And Innovation Can Resolve This Challenge.

We need to lessen our dependence on all oil--not just foreign oil. That requires many more liquid natural gas (LNG) plants, more new nuclear reactor power generating facilities, as well as more extensive use of fuel cells and more cars with hybrid engines.

We can no longer believe the oil-only-oil-forever propaganda of the American Petroleum Institute (API) and Detroit’s dying automakers, although we still need to find more oil sources around the world.

And the U.S. Environmental Protection Agency (EPA) must make it less difficult to build much needed new refineries, since new refineries are an unattractive investment option for major oil companies because of EPA’s excessive regulatory nonsense.

Hybrid cars are an example of substantial energy-saving innovation, alternately using either electricity or gasoline to power the vehicle at any given moment. 88,000 hybrids were purchased in the US in 2004, and 200,000 will be sold here in 2005, mostly Honda and Toyotas--plus one Ford SUV brand.

Hybrids cost more but can be less expensive to operate. They appeal to older, more affluent, more educated buyers than the average car buyer.

Not only will hybrids energize our auto market, but China is ready to export its cars to the United States within the next few years. China has 120 car companies, 14 of them large. GM, Ford, and Chrysler have invested a total of $6.0 billion in the Chinese car industry in the last few years.

Forbes Magazine reports that Chery, the eighth-largest Chinese car maker, will begin in 2007 to export 250,000 cars to the US. The sportscar models use Ferrari-like styling and Lexus quality manufacturing. Each of these dazzling, mouth-watering toys will cost only $19,000. They will not require being sold at the employee price or sold by using hefty rebates.

General Motors' competitive response is a threat to file a lawsuit against Chery, since the name is close to Chevy. Pathetic!!!

Issue #5. AMSOIL Dealers Have To Keep Changing, Growing And Keep Winning!

Frankly, we have no doubt that AMSOIL INC. will continue to make the most creative, best, highest quality oil and lubricant products for anything with an engine. AMSOIL always stay ahead of the pack.

However, Dealers will need to keep up with market trends, learn new ways of selling and doing our businesses. We must learn to deal with many different kinds of customers--particularly, upscale buyers.

They purchase recreational products (snowmobiles, marine, motorcycle, ATV’s, etc.) and many of them will buy hybrid cars, too. Upscale customers are heavy Internet users, making Internet proficiency mandatory of AMSOIL Dealers-not only to find upscale Baby Boomer customers, but Generation X (under age 40), business-minded Dealer prospects as well.

Never forget-AMSOIL is the marketing category creator that makes premium products for above-average buyers. AMSOIL products are not schlock or mediocre, mass market stuff for discount stores, flea markets, yard sales and auctions. AMSOIL is to lubricants as Rolex is to telling time. First class. In a class by themselves.

With gas at $5.00 to $6.00 per gallon, upscale people will be much more interested in using AMSOIL for improved fuel economy and longer engine life. They will become less likely to accept the “authority” of outdated mechanics who despise synthetics and their illegal, petulant threats to void warantees, if AMSOIL products are used.

Dealers, find ways to run your AMSOIL businesses to take advantage of opportunties available from topsy-turvey oil and energy markets, smiling all the way to the bank.

You need to make money on these things--not just the Wall Street crowd.