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Why You Should Be Maximum Bullish on the Canadian Oil Sands

By Matt Badiali, editor, S&A Resource Report
Monday, February 14, 2011

If the giant gap between per-person oil consumption in the United States versus China and India isn't enough to get you bullish on crude oil, I have frightening numbers to show you...
 
Most Americans hear vague statements about our "dangerous dependence" on Middle Eastern oil. But what most folks don't know is that we import more oil from Mexico than we do from Saudi Arabia. Another thing most folks don't know is that we import nearly as much oil from Nigeria and Venezuela. In 2010, we imported nearly three times more oil from Mexico, Nigeria, and Venezuela combined than we did from Saudi Arabia.
 
Now here's where it gets frightening... and why you should have a portion of your portfolio in the huge, safe Canadian oil sands.
 
One, Mexico's national oil company, PEMEX, is a disaster. Our neighbor to the south supplies about 12% of our monthly oil imports. Its production is in steep decline. Mexico produces less oil today than it did back in 1996. Today, its production is down 34% from its December 2003 peak.
 
Two, Venezuela supplies us with 8% of our crude oil imports. Its president, Hugo Chavez, is a lunatic who hates America.
 
Several years ago, Chavez kicked out all the international oil companies operating in the country, after they had invested millions of dollars there. Then he hired the giant service companies, like Schlumberger and Halliburton, to run his fields... until he owed them millions of dollars. Then he kicked them out, too. He's determined to ship as much Venezuelan oil to China, rather than the States.
 
Three, we have Nigeria, which supplies us with about 8% of our imported oil. Nigeria is blessed with incredible oil wealth... But it's a corrupt hellhole of a country. Angry mobs of disenfranchised locals constantly storm oil platforms and tap pipelines. It ranks No. 134 out of 178 countries in Transparency International's Corruption Index. You want to keep few eggs in this rickety basket.
 
So as you can see, we depend on many importers who are inept, enduring declining production, corrupt, or a mixture of the three. That's why you need to own a slice of the Canadian oil sands.
 
The Canadian oil sands hold the world's largest safe store of crude oil. Canada regularly ranks in the top 10 least-corrupt countries in the world. Its oil is a pipeline ride away from the U.S. There's no exploration risk. The oil is there... not miles under the ocean floor or in a dangerous place like Nigeria.
 
That's why China is buying up as much of the stuff as it can. The country is desperate to lock up safe oil supplies for the long term...
 
In the first six months of 2010, Chinese national oil companies and investment companies spent $7.3 billion on Canadian oil sands projects. PetroChina bought 60% of Athabasca Oil Sands Corp's Mackay River and Dover projects for $1.9 billion. Sinopec bought ConocoPhillips's 9% stake in oil sands miner Syncrude for $4.65 billion. China Investment Corp, a Chinese government-funded investment company, bought 45% of Penn West Energy's Peace River project. China is getting friendly with Canada for the long haul.
 
Earlier this month, I told you how owning safe Canadian assets paid off with rising oil prices. That little bump in price came from a tight oil market, spiced with the fear of looming supply shortages. It's another example of why, every time we experience a correction in the price of oil, you should be looking to buy Canadian oil assets on sale.
 
Good investing,
 
Matt Badiali




Further Reading:

During the BP oil spill last June, Matt made two predictions: "I expect this horrible accident will result in a ban on offshore drilling," he wrote. "I also expect it to provide a long-term tailwind to one of my favorite areas for investment: the Athabasca oil sands." His analysis was spot-on. Read how he recommended playing the future in oil investing here: What You're Not Hearing About the Coming Offshore Drilling Ban.
 
The oil spill also gave Frank Curzio's Growth Stock Wire readers a terrific opportunity to invest in one of Canada's large-cap oil producers. "Looking ahead, I see terrible times for the offshore industry," he wrote. "That's great news for Canada's oil sands." Learn more about his pick here: A Major New Tailwind for the Canadian Oil Sands.

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
CARBO Ceramics (CRR)... frac it, baby!
eBay (EBAY)... online auctions
Harley-Davidson (HOG)... things can't be that bad
Moody's (MCO)... credit ratings
Baidu (BIDU)... the "Google of China"
Apple (AAPL)... taking over the world
iRobot (IRBT)... will take over the world
Capital One Financial (COF)... credit card giant
JDS Uniphase (JDSU)... networK gear
Mosaic (MOS)... check out "farm income through the stock market"
Netflix (NFLX)... movie rentals
Rayonier (RYN)... timber REIT
Service Corp (SCI)... funeral home giant
Tanger Factory Outlet Centers (SKT)... huge outlet mall operator
Kansas City Southern (KSU)... railroads
Stryker (SYK)... surgical implants and equipment
Harris & Harris (TINY)... nanotechnology
VeriSign (VRSN)... online security
Whole Foods (WFMI)... expensive groceries
Platinum, Palladium, Corn, Soybeans, Wheat, Coffee, Cotton

NEW LOWS OF NOTE LAST WEEK
 

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