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Best Stock for 2009: ExxonMobil

David Lee Smith
December 18, 2008

Which stocks are looking fine in ’09? Discover all our Foolish ideas for The Best Stocks for 2009.

We inhabit a crazy world these days, what with triple-digit flip-flops becoming commonplace for the equity markets, along with the energy rollercoaster that's been such a major part of 2008. Think about it: We began the year with crude prices near $80 a barrel and watched them climb steadily to above $145 by midsummer. And then, in just the past five months, they've plummeted to about a third of their July highs. Whoo!

Where to from here?
So as we sit with black gold having plunged to almost $40 a barrel, I'm guessing that you now have two key questions regarding energy: One, will current prices hold for at least a little while? And secondly, no matter the answer to the first question, what is your best bet to reward investors in the sector?

Not to be cantankerous, but I'll tackle your second question first: It seems to me that an optimum way to participate in energy going forward -- and you absolutely shouldn't abandon the group -- is to salt away some shares in the big enchilada of Big Oil, ExxonMobil (NYSE: XOM  ) . What follows is why I feel that way, along with why I believe that, if you're looking at a timeframe beyond, say, a year or 18 months, it's very difficult to argue that crude prices won't be higher than they are today -- maybe not back to $147 a barrel, but higher.

First, OPEC just agreed to cut 2.2 million daily barrels from its total oil production -- its deepest cut ever -- in an effort to thwart the continuing downward slide of crude global. And while agreeing to chop production and actually doing so may not be one in the same for the cartel, oil's global supply and demand remain tight enough that almost any production reductions should have some effect on prices.

Big spending cuts
Beyond that, you probably know that Canada is our biggest oil supplier. But a major share of our Canadian imports comes from oil sands in Alberta, which are extremely expensive to produce. As such, a host of development projects in the area -- along with some in other parts of the world -- have been shelved for economic reasons. With crude below $50 a barrel, it's my contention that you'll see more and more projects curtailed, thereby running the risk of a growing supply-demand imbalance. Indeed, on Friday, Baker Hughes (NYSE: BHI  ) reported a sharp drop in U.S. drilling activity.

And longer term, in a recent missive, ExxonMobil repeated its contention that global energy demand will ultimately have risen by 35% in the 2005-2030 period. If 2030 seems like eons away, think again. It really isn't.

But why Exxon? After all, there are other solid integrated companies that you could tie into. BP (NYSE: BP  ) , Chevron (NYSE: CVX