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The long energy rally could still have plenty of fuel.

For starters, some major oil companies appear poised to report another record quarter. For another, well-equipped refiners -- capable of processing heavily discounted crude oils -- have found themselves pocketing a load of extra cash. And for the foreseeable future, some experts now believe, rising demand and tightening supplies will combine to keep energy prices high.

"The energy bull market has just begun," insists Bob Howard, author of the investment newsletter

Positive Patterns

. "As you know,

energy has been a sweet place to be -- and that is not going to change."

Over the next two weeks, the oil majors will announce results for the final quarter of what proved to be a banner year for the group. Friedman Billings Ramsey analyst Jacques Rousseau expects at least three of those companies --









-- to set records. He believes these companies will report strong results across all their major business lines.

To be sure, the companies have delivered impressive numbers so far. During the first nine months of the year, ConocoPhillips grew revenue by 22% -- and profits by a whopping 56%. Industry giant ExxonMobil increased both revenue and profits by nearly 20%. And Total expanded revenue and profits by 14% and 17%, respectively.

Howard, for one, is hardly surprised. Unlike many, he has long considered high energy prices -- which powered last year's rally -- as long term in nature. Even now, he calls the chart for the major energy index "exceedingly bullish" and ready to move even higher. And he sees bargains in the energy drilling and equipment index as well.

Thus, Howard continues to recommend a number of energy stocks -- especially

National Oilwell






Oceaneering International


-- even as they keep climbing. And he suggests that skeptical analysts give up and join his bullish camp.

"Still clinging to that 'Oil will come back to $25' story?" he asks of Wall Street. "Isn't that getting a little stale?"

Fresh Views

To be sure, some analysts -- waiting for an oil plunge -- are starting to sound resigned.

Fadel Gheit of Oppenheimer has long portrayed oil as overpriced. He blames a large terror premium and "excessive speculation" for the rise. But he doubts that oil will correct itself anytime soon.

Instead, he believes that worldwide unrest -- including a possible attack on Iran -- could destabilize the situation further. Meanwhile, he says, energy stocks should continue to benefit. He expects many energy companies to beat earnings estimates and raise the bar for the future. As a result, he sees the potential for another 20% jump in the stocks.

Meanwhile, Rousseau has even warmed up to some refiners he viewed cautiously in the past. Last week, he upgraded three --









-- because of their ability to process heavy, sour crude oil that's far cheaper than the sweet crude that's in increasingly short supply.

Rousseau's upgrade comes exactly eight months after

first highlighted Valero because of this very capability. Valero's stock, which rose 1.5% to $49.68 on Wednesday, has jumped more than 50% since that time.

Harry Chernoff, a principal at Pathfinder Capital Advisors, identified Valero as a solid investment early on. He continued to highlight the company -- along with Premcor and



-- in a

special piece for


last month.

In that analysis, Chernoff laid out a detailed explanation for high oil prices.

"Four trends -- unrelated to terrorism, disruptions, bankruptcies or speculation -- are changing world oil markets," Chernoff wrote. "All of these trends are highly significant, and some are permanent."

First, he wrote, the world has started to rely on heavy, sour crude -- increasingly more than sweet benchmark grades -- to satisfy rising demands. Second, he said, the industry is facing tighter sulfur standards that lower the output of gasoline from all, but especially heavy, oil types. Third, he said, the world lacks the advanced refining capacity to process the abundant heavy crudes. And fourth, he said, oil prices -- as measured in real terms -- have yet to climb enough to cause a meaningful reduction in demand. He went on to explain that the weak dollar makes oil look more expensive than do other currencies.

Looking ahead, Chernoff foresees a major change in both the definition of benchmark crude and the currency used to price it. He says that some organizations have been exploring the possibility of using heavier -- and cheaper -- crude, like that pumped out by the Organization of the Petroleum Exporting Companies, as the new benchmark. In addition, he says, some have widely discussed using a "market-basket price," based on the euro and yen in addition to the dollar, to value oil in the future.

If so, these two moves -- based on cheaper oil and more valuable currencies -- could make oil prices start to look more normalized again.

"The media, the public, the politicians and most energy analysts have been looking at the wrong crude benchmarks and potentially the wrong currency benchmarks," Chernoff concluded in his article for


. "Many individuals in these groups could save themselves a great deal of aggravation by recognizing the fundamental and permanent (or soon-to-be permanent) changes in the crude and products markets instead of berating OPEC and others about some obsolete notion of a fair price for oil."