Greetings, my name is Bret Boteler, and I’m the founder and president of EnerMax, Inc. I’ll be coming to you over the next several weeeks with insight and commentary on the oil and gas investment marketplace.

I know that are many risks and potential benefits associated with oil and gas investing, but make no mistake: The U.S. oil drilling market is one of the most dynamic and compelling industries in the world, and EnerMax is thrilled to be a part of it. That said, investing in oil and gas is serious business. That’s why we believe in educating interested parties about all aspects of the industry so you can make a well-informed decision. And that, my friends, is what our weekly commentaries are all about.

This week? It’s not 1973 again, but it sure feels like it. Let’s have a look at some of the key issues enveloping the oil and energy market as the holidays approach.

Oil prices - First, there seems to be a wide diversity of opinions on the direction of oil prices. Often, that diversity comes from the same place. In October, Merrill Lynch predicted oil headed to $25 a barrel, in the short term. But hold the phone. Oil could bounce back to $90 a barrel later in 2009. According to who? Merrill Lynch. Trying to raise prices hasn’t worked, either. OPEC’s decision to cut supplies by two billion barrels a day earlier this month seemingly hasn’t had the desired effect on prices, as they slid 4% on Monday (to under $40 per barrel on the New York Mercantile Exchange.) Most analysts expect short-term volatility at least through early 2009.

The Demand Slide – the reason why oil prices are low is that demand is historically low – a global phenomenon that, again, we haven’t seen since the early 1970’s. As Jame Carville said about the 1992 presidential elections, “it’s the economy, stupid”. The global economic recession has driven demand down. Not helping matters is the fact that stocks and commodities are in freefall in 2008, the euro is sliding against the dollar, and yields on U.S. Treasury Bonds have shrunk to miniscule levels, creating excessive volatility in the global fixed income marketplace. With that perfect storm brewing, it’s not hard to connect the dots and see that as the global economy weakens and money and credit are constricted, energy prices are the first suffer as demand slides for oil and gas.

The Way Out? – At EnerMax, we don’t own a crystal ball and we don’t make predictions. That said, there are some broad indicators already in play that signal positive change for oil and gas investors in 2009. First, a ramp-up in domestic drilling is on the way. The lure of substantial tax write-offs coupled with the opportunity to receive monthly revenue distributions (along with the opportunity to diversify into oil at lower prices) is a strong one and should attract buyers currently hording cash on the sidelines. Another good indicator is the stock market. Behind the scenes increased domestic drilling activity should rise as demand increases, especially from recently-emerging economic super powers China and India, who carry more weight (and more middle-class consumers) than at any time in recent history. But one indicator that has proven historically reliable is oil services stocks. When they ramp up, the price of oil usually follows.

2009: A different picture

By and large, the oil and gas pricing environment will look a lot different in December, 2009 than it does now, with more consumers back at the pumps and U.S. drilling activity on the rise. Until then, investors would be wise to understand that investing in oil is no poker game – and that it’s not time to go “all in”. But a gradual approach could produce positive results.