A: No. You can make gasoline out of asphalt. Oil is a hydrocarbon, which is a fancy name for a long chain of carbon, hydrogen, and various other atoms.

The smallest of these chains is methane gas (cow flatulence), made up of one carbon and four hydrogen atoms. The really long chains, like asphalt or the bitumen from oil sand, can be “cracked” into smaller pieces to make gasoline and heating oil.

Some refiners lack the ability to crack extra-long hydrocarbons, and must rely on “lighter” crudes. But these days, those crudes are harder to find and carry a premium price tag.

So several companies are either updating their refineries or building upgraders. An upgrader is simply a pre-refinery, where they can clean up bitumen, remove all the impurities (like salt and sand), and chop it into shorter chains so regular refiners can handle it.

As these upgraders come on line, demand for the oil sands’ bitumen will skyrocket, pushing prices up. That’s great news for big oil sands players, like Suncor. But the triple-digit gains will come to the smaller oil sands outfits Wall Street has yet to discover. Click here to read about one of my favorites right now.

Q: When I began to buy gold, I bought IAU instead of GLD. Their performance is the same, but everyone seems to recommend GLD and never IAU. Have I made a major mistake? – D.H.

A: Nope, your investment is fine. IAU and GLD both hold bullion, i.e. physical gold. The big difference between the two is size: GLD has a market value of $19.2 billion, while IAU is only about $2 billion. So anyone who wants to buy large blocks of shares will choose the more liquid option, GLD. But their price performances are virtually identical.

Besides the bullion funds, you can buy ETFs to bet on gold miners and gold futures. Take a look:

As you would imagine, bullion is the most straightforward. These funds have a vault full of coins or bars that, theoretically, cover the shares.

The only futures fund on there is DGL. But using gold futures seems like an unnecessarily complicated way of tracking the price of gold, so I’m not fond of it.

The last fund is simply a basket of gold-mining companies that tracks the AMEX Gold Miners Index (^GDM on Yahoo). The top five holdings – Barrick, Goldcorp, AngloGold Ashanti, Newmont, and Goldfields – make up about 36% of the index.

These big miners are underperforming bullion ETFs over the last two years (GLD is up 27% while GDX is up about 17%). But I think this fund will do well when we reach the mania stage in the gold bull market.

For investors who simply want exposure to gold or mining, these funds are an easy place to start.

Good investing,

Matt

P.S. If you have another exchange traded fund you use to buy gold, send me the symbol so I can tell people about it. I’m always looking for new ideas.

Source: Why Athabasca Crude Oil Will Be Worth More and More

There’s just not enough of the clean-burning stuff to go around… and the big players who dominate the market, like Gazprom, are far too strong for the West’s liking. That reality can translate into strong profits for investors who know where to drill.

Warm Regards,

Justice Litle, Editorial Director, Taipan Publishing Group

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North America and Europe are becoming increasingly desperate in their search for new natural gas deposits. But their pain can be your gain…

Spring is traditionally the time of year when baseball gets into full swing, you start cussing at the lawn mower, and natural gas prices drop as heating demand eases and air conditioner demand is a month away.

But not this year. After two years of mild winters and low heating demand, natural gas has spiked during the traditional soft period. In fact, it’s more than doubled to an intraday high of $11.79.

Demand for Clean Energy

It’s ironic that the religion of global warming has taken root along side an emerging energy crisis. One feeds the other in a hippy spasm of Exxon greed and brown clouds over Mumbai.

The demand for clean energy means that most new power plants are fueled by natural gas instead of coal. And as Andrew Mickey so gracefully pointed out in this space a few days ago, natural gas is slowly becoming a fungible global market. That means that more gas is going to Europe and Japan, due to higher prices over there.

The end result is that North American inventories have been depleted, and prices are going up.

Market forces dictate that higher prices result in more supply, which is also happening. Formerly uneconomical supply sources, such as coal-bed methane and shale gas, are now becoming economically feasible.

U.S. natural gas supplies will likely go up by 3.6 billion cubic feet a day in 2008. This compares to a growth rate of 2.2 Bcf/d in 2007 and 1.2 Bcf/d in 2006. So far, the demand is sucking all this up and then some.

The good news is there’s a lag between the spot price chart and the stock price of natural gas producers. One small ($2.42) natural gas producer I recommended in Crisis Trader sells its product on the spot market. Which means it benefits greatly when the price goes up. It just reported a 160% gain in net income for the first quarter.

This validates the idea that the 2005 supply glut and subsequent market crash is now history. Times are good and getting better for natural gas producers, if not for customers.

Gazprom Turns the Screw

On Monday, the Russian giant, Gazprom, shut down a quarter of its gas supply to the Ukraine to force the country to pay off a $600 million debt. This was settled today, but underscores Europe’s worries over the reliability of natural gas coming from Russia.

The last time Gazprom played this game was two years ago, when the Ukraine went for three days without gas and pipelines in Europe saw a drop in pressure.

Europe gets 20% of its gas from Ukrainian pipelines. The Ukraine, in turn, gets its gas from Russia. It’s a system that leaves Europe beholden to Russia, much like the U.S. is beholden to OPEC.

As Lord Palmerston once said, “Nations have no permanent friends and permanent allies, only permanent interests.” This means that Europe is looking for other suppliers. North Africa fits the bill, and a pipeline is being built to Spain.

To my way of thinking, this smells like opportunity. And in fact, I’ve discovered one small player — soon to be big — that is sitting on vast, virgin natural gas deposits. I’m finishing up my report as we speak. I’ll have it to you in the next few days… Talk about perfect timing.

Christian DeHaemer, Editor, Crisis Trader

For the tale of the tape, the TSX Exchange gave back 0.34%, while the TSX Gold Index lost another 0.9% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, lost 0.78% with the declining issuers swamping the advancers by a 605 to 424 margin on surging volume of 267 million shares traded.

Iamgold tabled a profit of $34.4 million, or $0.12 per share, for the first quarter of 2008. This was triple the $11.3 million or $0.04 cents a share tabled in the same period of 2007 as higher gold prices offset rising costs. Investors however, remain skeptical as shares of Iamgold ended the day up only C$0.05 at C$6.10.

Not to be outdone, Cameco reported first-quarter earnings of $133 million, up by 125% from a year ago as revenue increased to $593 million on higher prices for uranium and gold and an increase in uranium volumes. The World’s largest uranium miner tabled earnings of $0.37 per share compared with $59 million or $0.17 per share in the year-earlier period. Cameco ended the day up C$0.06 at C$40.34.

Midlands Minerals failed to attract interest after reporting that its fully-permitted, past-producing Sian project in Ghana hosts an indicated resource of 2.56 million tonnes grading 2.33 grams gold per tonne, plus an inferred resource of 2.69 million tonnes grading 2.35 grams gold per tonne. Midlands ended the day unchanged at C$0.24.

Coal continued to attract interest as evidenced by West Hawk Development, which inked a letter of intent to acquire and develop a coal mine and coalbed methane gas operation in Oklahoma and Arkansas. West Hawk ended the day up C$0.08 at C$0.33.

A stock to keep an eye on is Gabriel Resources as the company continues to try to get the huge Rosia Montana project in Romania back on track. Gabriel ended the day up C$0.37 at C$2.70 on nearly 11 million shares traded.

The United States dollar is showing signs of renewed strength but commodities are continuing to hold up well. We will see what Wednesday trading has in store.

Source: Resource Stock Roundup: Wednesday, May 14th, 2008