After all, the economies in both China and India are apparently continuing to grow at a fairly rapid pace, and those countries’ demand for transportation and other forms of energy are thus likely to keep pace. For some minerals, the period of high prices from 2005 to 2008 has produced a surplus. But no such effect has been seen in the oil market, as large new discoveries are hard to find.

If we’ve learned anything in the last few years, it’s that political risk is very important in oil investments. It’s not just a question of outright nationalization – as is true in Venezuela. Other greedy countries, like Nigeria, boosted the royalties payable when oil prices were high, and have shown little willingness to reduce them again now that they have declined.

Hence, it’s once again time to look at investments in the one important energy source whose friendliness to the United States and decent quality of governance can be assured.

I’m speaking, of course, about Canada.

Canadian oil-and-gas investments are attractive for three reasons.

• Canada’s political stability makes it a buffer against turmoil from less-stable oil sources.
• The country’s conventional oil-and-gas sources add substantial capacity at reasonable prices to U.S. domestic oil production; these sources are profitable at almost any plausible oil price.
• And Canada’s tar sands in the Athabasca region represent a potential source of oil, with approximately 1.6 trillion barrels of theoretically recoverable reserves. That’s potentially larger than the Middle East, but with two major problems: The cost of production is high and the environmental impact could be substantial.

That last point – and the two major problems it identifies – is key. At low oil prices, both factors make tar sands problematic; it is politically more difficult to overcome environmentalist objections if secure oil sources do not appear a priority. However, at high prices, environmentalist problems go away, although they may add to extraction costs. However, if prices escalate rapidly, extraction costs also tend to escalate, so oil-shale-producers reaped less of a bonanza than they might have in 2007-2008.

Now that oil prices have stabilized, the cost increase has slowed, so that (for example) Suncor Energy Inc.’s (NYSE: SU) tar-sands-production costs in this year’s first quarter rose only 6% from the previous year, hitting $28 per barrel. Since oil prices are currently around $58 a barrel, that leaves plenty of profit margin.

The Canadian oil business is still rather more entrepreneurial than the international majors – Calgary is that kind of place. I remember an instance when I was working as a banker back in the 1980s. I’d spent the weekend in New York with my girlfriend, and then turned up for a scheduled Monday lunch with some oilmen at the Ranchmen’s Club. Not thinking, I’d ordered my normal urban cocktail, an Apricot Sour. This was quite rightly treated with great derision, and I was firmly presented with a bullshot (vodka and beef bouillon) – in a pint beer mug!  Got the deal, I’m proud to say, but was pretty worthless for the rest of the day.

The message: Investing in Calgary oil is a little like dining at the Ranchmen’s Club; you have to have certain qualities of fortitude and stamina!

Canadian oil companies you might look at include the following (when looking at earnings, the first quarter of 2009 is a good guide; 2008 is all over the place because of the bizarre behavior of oil prices):

Canadian Natural Resources Ltd. (NYSE: CNQ): Primarily a conventional oil producer, this company’s operations are centered on Western Canada, the North Sea and offshore West Africa (Gabon), though it is also building an oil sands plant north of Fort McMurray, Alberta. It is trading at about 14 times earnings when you strip out misguided risk management, and about 80% above book value. It’s over-leveraged, too. Conclusion: A decent company, but pricey.

EnCana Corp. (NYSE: ECA): North America’s largest natural gas producer and conventional oil producer, with operations in Western Canada, offshore Nova Scotia and the Western United States. It is a leader in oil recovery through steam-assisted natural drainage. Based on first-quarter earnings, its Price/Earnings (P/E) ratio is about 9, and its Price/Book (P/B) ratio is about 1.7. It has only moderate leverage. Conclusion: This one looks like a decent value; it even pays a semi-respectable dividend, yielding 2.8%.

Imperial Oil Ltd. (NYSE: IMO): Majority-owned by ExxonMobil Corp. (NYSE: XOM). Even though it’s now headquartered in Calgary, Imperial is the least Calgary-ish of Canada’s oil majors. It owns 25% of Syncrude Canada Ltd., the oldest tar sands project, and also explores for and produces conventional oil in Western Canada and in the offshore Atlantic provinces. Imperial also refines and markets petroleum, owning a chain of service stations and convenience stores, and produces petrochemicals. It experienced a sharp drop in first-quarter earnings, its P/E based on the lower first-quarter results is about 40, with the stock trading at four times book value. Conclusion: Overpriced.

Nexen Inc. (NYSE: NXY): The former Canadian arm of Occidental Petroleum Corp. (NYSE: OXY), it owns 7% of Syncrude and another (Long Lake) start-up tar sands project, and has oil producing operations in Yemen, the North Sea, the Gulf of Mexico, Colombia and offshore West Africa. Its P/E is about 20 based on first-quarter results and it is very over-leveraged. Conclusion: Given the non-Canada risk, not very attractive.

Suncor Energy Inc. (NYSE: SU): A major tar sands play, Suncor has now agreed to merge with Petro Canada (NYSE: PCZ), a deal that’s expected to close in the third quarter. Suncor also produces natural gas in Western Canada and operates refineries. Petro Canada has tar sands, natural gas, pipeline and retail operations. It is priced at about 30 times annualized first-quarter operating earnings, but oil prices are up about $10 since then (which should boost its earnings), and its tar sands production is ramping up. Conclusion: At 2.3 times book value, with a respectable balance sheet, it’s a decent bet on oil’s growth sector.

Talisman Energy Inc. (NYSE: TLM): The former BP Canada (NYSE ADR: BP), it was spun off in 1992, grew through acquisitions, and now has a diversified portfolio of holdings. It’s active in Western Canada, the Western United States, the United Kingdom (including a wind-farm operation), Norway, Colombia, Peru, Algeria, Tunisia, Indonesia, Malaysia, Vietnam, Australia and Qatar. It has sold $2.5 billion worth of operations to raise cash. Talisman has a P/E ratio of about 8, based on its first quarter, or 11, based on continuing operations in that quarter. It has a P/B ratio of about 1.4, and only moderate leverage. Conclusion: An iffy company in terms of quality, but cheap, and is thus worth a look.

Source: The Six Ways to Play Canada’s Oil Sector

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“As the post-Memorial Day hangover lingers, and $4 per gallon gasoline becomes a national reality, expect more and more daily energy prognostications,” says William Patalon III in Money Morning.

“Goldman Sachs Group Inc. (GS) already is on record for $200-a-barrel oil. As you all know, our own Keith Fitz-Gerald has projected a crude-oil price of $225 a barrel. Do I hear $250? What about $5 a gallon gasoline by July 4th?

“Sometimes, these daily price gyrations take on lives of their own, but at the end of the day, the basic laws of supply and demand always work themselves out.”

There’s a new oil rush going on in Alberta, Canada, says Alex Green in InvestmentU: “Alberta’s oil sands are the largest known reserve of oil on earth containing between 1.7 and 2.5 trillion barrels.”

“For decades, these sands weren’t even considered part of the world’s oil reserves because the oil there wasn’t economically extractable at prevailing prices using then-current technology. But times have changed… And the new gold rush is on.

“Here’s the kicker: Exploration of Alberta’s oil sands is virtually risk-free. You can’t drill a dry hole here. There’s no drilling at all. It’s a mining operation – and the reserves are thoroughly outlined. So what you really need is a company with plenty of machinery, money and manpower to dig it up and process it as quickly as possible.”

Read on here to find out the one undisputed blue-chip play on Alberta’s oil sands.

Indonesia, the only OPEC member in Southeast Asia, will pull out of the group as aging fields and declining production force the region’s biggest economy to boost imports.

Energy Minister Purnomo Yusgiantoro will sign a decree today to exit the Organization of Petroleum Exporting Countries, he told reporters in Jakarta. The nation, a member since 1962, has been considering leaving the body in the past three years.

As OPEC shrinks in numbers, there’s a new oil rush going on in Alberta, Canada.

“Alberta’s oil sands are the largest known reserve of oil on earth containing between 1.7 and 2.5 trillion barrels,” says Alex Green in InvestmentU. (Saudi Arabia, by comparison, has only 262 billion barrels of proven reserves. In fact, all OPEC nations combined have less than 900 billion barrels.)

“For decades, these sands weren’t even considered part of the world’s oil reserves because the oil there wasn’t economically extractable at prevailing prices using then-current technology. But times have changed… And the new gold rush is on.

“Here’s the kicker: Exploration of Alberta’s oil sands is virtually risk-free. You can’t drill a dry hole here. There’s no drilling at all. It’s a mining operation – and the reserves are thoroughly outlined. So what you really need is a company with plenty of machinery, money and manpower to dig it up and process it as quickly as possible.”

Read on here to find out the one undisputed blue-chip play on Alberta’s oil sands.

The good news is that there is new oil production capacity in the pipeline this year and next,” says Dan Denning in The Daily Reckoning Australia.

“Keep in mind that the final investment decision on the projects entering into production this year was made anywhere from 3-6 years ago. That shows you how far in advance you have to plan for new production (assuming you’ve even found oil in the first place).

“There are some massive LNG and natural gas projects coming on-stream between 2011 and 2015. Gazprom, Shell, BP, and ExxonMobil all look like big winners, should oil prices stay high and pass through to higher LNG prices.”

Crude prices jumped on Monday in electronic trading as news of the attack broke, but analysts said the impact on prices spilled over into Tuesday, when exchanges on both side of the Atlantic re-opened after the long weekend.

“Is it demand? Is it speculation? Is it OPEC punishing George Bush for the war in Iraq?” asks Dan Denning in The Daily Reckoning Australia. “OPEC thinks there’s plenty of oil. It’s the declining U.S. dollar that’s to blame. OPEC says that for every one percent decline in the dollar oil rises by US$4, and vice versa.

“The solution to high oil prices, then, is not increased supply or reduced demand, but a stronger U.S. dollar! Well, there is certainly some truth to that, but it is not likely to happen any time soon. As a tangible good whose supply cannot be increased by a central banker, the oil price (a little like the gold price) tells you there’s too much paper money chasing too little stuff.”

Alexander Green in Investment U has identified a new, highly profitable oil source: “Alberta’s oil sands are the largest known reserve of oil on earth, containing between 1.7 and 2.5 trillion barrels. (Saudi Arabia, by comparison, has only 262 billion barrels of proven reserves. In fact, all OPEC nations combined have less than 900 billion barrels.) For decades, these sands weren’t even considered part of the world’s oil reserves because the oil there wasn’t economically extractible at prevailing prices using then-current technology.

“But times have changed… And the new gold rush is on.

“In Alberta’s oil sands, energy companies don’t drill for oil. They dig it up. After excavation, giant trucks three stories high – carrying up to 400 tons of oil sands – carry it off to a processing plant.”

Read on here to find out how to cash in on the tar-sands “black gold” rush with this oil mining company.