If you’re confused about what’s next for those once-sizzling energy stocks, get in line. Obviously, the price of oil will have a big voice in future stock prices. So where is it going?

T. Boone Pickens and Goldman Sachs say it’s headed to $100 a barrel. Maybe so, but such a seemingly outrageous forecast, given the unknowns, is no longer viewed as lunacy, especially with oil hovering around $50 a barrel.

Meanwhile, many energy stocks have cooled off dramatically after giant runs in 2003 and 2004 when the sector rose 22.4% and 28.8%, respectively. Many are now going sideways or down, even though the group itself this year is up 8%. So what’s next for these stocks?

Relating that question to the likely price of oil, Goldman and Merrill Lynch predict it will average above $50 for the rest of 2005. Most energy pros, though, see prices falling, with some, such as Banc of America Capital Management, predicting an average cost in the low- to mid-$40s in the second half of the year.

Investment adviser Stephen Leeb of Leeb Capital Management notes that among most major Wall Street firms, the highest projection for oil over the next three to four years is $36, while the average projection is around $32. In the case of Goldman, it’s tempering its $100-a-barrel projection in the next few years by predicting an ensuing drop by the end of the decade to below $30.

Goldman believes most energy stocks are priced to reflect oil in the $30s and views them as compelling buys. Merrill, on the other hand, argues the stocks are priced to reflect oil in the $50s. So the eventual decline it sees in the price of oil to the low $30s, Merrill believes, will send oil stocks commensurately lower.

Yup, it’s confusing. So what’s the best strategy and whom do you believe? The answer, of course, is no one knows where oil is going, given rising demand and shrinking supply, along with uncertainties arising from possible terrorist activity, potential supply disruptions, unclear OPEC and Russian output, and the extent of demand from such rapidly growing economies as China and India.

Still, some pros contend there’s lots of vigor left in energy stocks, and you have to own them. One is Mr. Leeb, who believes “we could be in the very early stages of a massive bull market in energy stocks.” He would continue to overweight them, particularly oil-services companies, one of the few groups, he believes, likely to maintain their valuations as inflation rises. Energy stocks, he contends, are nowhere near their ultimate highs, and one reason is Wall Street is clinging to the fantasy that oil prices will come down permanently.

Mr. Leeb views such thinking as poppycock. “Wall Street is as wrong on energy today as it was on technology in 2000,” he said. Mr. Leeb believes demand simply won’t ease, especially given the increasing needs of fast-growing China and India. Likewise, he points out, supply won’t increase fast enough. Over the past six years, Russia has been the source of the biggest increases in supplies. But the recent demise of Yukos, its largest oil company, and the scaling back of drilling projects means growth in Russia’s oil supply will likely drop dramatically.

To Mr. Leeb, rising demand and stagnating supply strongly suggest the uptrend in oil prices will continue. “Hence,” he said, “Wall Street’s projections for energy stocks are inherently flawed and way too low.” And this means, he adds, “at current prices, energy stocks are compelling bargains.”

Mr. Leeb said if he had to put all of his money in just one oil-service company, it would be Schlumberger ($67.28), the hands-down leader in well discovery management and seismic services. Its clear technological edge, he notes, is reflected in profit margins far higher than its competitors. Noting that its stock has historically traded at a sharp premium to the S&P – in the 1970s it was twice that of the S&P and now it’s premium is only 25%, based on estimated 2006 earnings – Mr. Leeb observes that if valuations were to expand in line with historic norms, Schlumberger’s shares would rise to more than $90. “I think it will do even better and I would aggressively accumulate the stock,” he said.

Mr. Leeb is also gung-ho on several drillers, notably Noble ($55.03), Nabors Industries ($54.15), and Transocean ($48.35), each of which covers the gamut of drilling services, and is tops in its own particular area. For example, Noble is the premier offshore driller, Nabors is the premier land driller, and Transocean is the dominant player in deep-water drilling. Mr. Leeb notes each of these companies has far surpassed its rivals in every relevant category, from revenue growth to profit growth to profit margins. They should have no trouble maintaining their lead, he observes, and each of the three stocks, he figures, has the potential to rise two- or threefold over the next three to five years.