Since Thursday, I've had a number of conversations about the Alberta oil sands. A few readers were skeptical that the oil sands industry would ever be able to produce five million barrels per day.

First I was told that projects would cost too much. Then it was about how technology would never be able to increase production. And, of course, I heard all about the government digging its taxes into future projects.

Like I said, they were skeptical, but there was something none of them could deny...

With 174 billion barrels of oil, the Canadian oil sands are going to be developed, one way or another.. There's just too much oil to let go. The way companies look at it, “It's either them or us.”

And trust me, everyone is scrambling for a piece of the action.

Preparing for an Energy Crisis

I know I've said this before, but I'll reiterate it for the sake of my newer readers...

You can toss out the geopolitical mess in the Middle East, potentially damaging hurricanes or even governments sticking their tax hooks into oil companies. Certainly, any disruptions in those factors will drive oil prices higher, but that's not what we need to focus on.

The fundamental problem in the oil markets today boils down to supply and demand. Simply put, supplies will continue to tighten as the world's consumption levels grow. And the greater the gap is, the tighter the markets will become.

That's it.

Let's take a look at that growing consumption for a minute. Sure, I'd like to point my finger directly at China and India, but your reaction would be....

“That's nothing new. Everyone knows China and India's oil addiction is growing dramatically.”

I'll accept that.

For now, however, let's focus on the rising domestic consumption in our major exporting countries.

Take the king of OPEC, Saudi Arabia, for example. Last year, Saudi Arabia's oil consumption jumped 6.2%. They may be producing 9 million barrels per day (more than 10% of global production), but the truth is that they will have less oil available to export.

And don't think the Saudis are alone.

Iran's high energy consumption has caused the country to start rationing gasoline last June. As a result, they're forced to pay $0.34 a gallon for their gas. What an outrage! I can feel the indignation seething out of my European readers. The gasoline rationing is expected to end in March, 2009.

So how are the “smaller” oil producers facing the oil crisis?

We've all seen the heart-warming commercials that BP has floating around, touting their commitment to alternative energy. Personally, I can't keep a straight face when I see the the “Beyond Petroleum” slogan. Don't get me wrong, it isn't the green energy I'm laughing at, but rather BP. It appears the company is getting its hands into everything, even the “dirty tar sands” up in Alberta.

You heard that right.

Last week, the company announced it was moving into the oil sands business by acquiring a stake in the Sunrise field in Alberta. The field, operated by Husky Energy, is expected to begin bitumen production by 2012 and reach up to 200,000 barrels of oil a day.

Perhaps they're covering all the bases, just in case.

The Investment Opportunity of a Lifetime

Over the next few decades, the world is going to experience a major shift in its energy consumption. The fact is that we can't extract oil as easy (or as cheap) as before. And considering oil producers are struggling just to keep up with declining production, more investment dollars are pouring into unconventional resources and alternative energy stocks .

Are we supposed to sit on the sidelines while trillions of dollars is being spent on the world's energy infrastructure?

It's going to happen one way or another.

Last Thursday, I told you there was a place investors could go. Now, a lot of my readers know what I'm about to say, but I don't think it's fair if you don't have the same opportunity as them. If you're interested if finding out more, just click here.

Until next time,

Keith Kohl

www.energyandcapital.com

"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

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Yes, Mr. Kohl you are correct. The energy train is headed for a derailment and America refuses to get off of the train! Why is it that Detroit cannot create the next energy efficient non hydrocarbon vechile? They refuse to and Americans think every wife needs a 2-1/2 ton four wheel drive vehicle to take 2.5 kids to a soccer field on paved freeways? What are we thinking? Doesn't anyone remember the 5% oil import cut OPEC imposed, in the 70's, which brought this great nation to it's knees over night??? Our government is paying the Mid east countries outrageous prices for fuel to keep the Persian Gulf safe for the world to enjoy imported oil? The Saudis ought to be paying us for the privelege of defending their shores. Why can't Washington see that conflict only causes profit fot the mid east. Why don't we just tell them that $50 a barrel is what we will pay and we will be sending them a bill for the naval forces defending their shores. Lest we forget Brave Americans are volenteering their lives in service of America to battle terrorist in Iraq and Afganastan. Where is our respect for all of them? I have made a great living by working in the oilfields of offshore Louisiana and Venezuela but even I can see we need to get off of the BARREL!
America is a land of opportunity so let us not wait until the train derails, let us make the next energy source that the rest of the world will need to survive. Let us lead and not just fall victim to our blindness. I was working offshore of Grand Isle, Louisiana when Katrina came rolling through. I am here to say it was the most devastating force I had ever lived through. Less than two weeks later the Louisiana Offshore Oil Port was backed up with tankers from the mid east to help America through it's loss of production. Let us not forget that that generosity was fueled by opportunity to drive the barrel up. By the way, when will we meet the guy incharge of oil price speculation? The oil producers don't directly set the price? I can only suspect that some Armani suit in New York is setting the price and reaping the benefits while the world just pays! I am just concerned no one is looking at the future. If an oilfield worker can see it then surely someone higher up in management can see it? Right?

God bless.

Roland

I found your comments driven by the same bunch of offical B.S. There is something you should be discussing and that is the oil play taking place in the Bakken formation in the williston basin in Saskatchewan, North Dakota and Montana. There is more oil there than in the oil sands> It is estimated there is l.5 billion barrels in the Sask. formation around Estevan and Weyburn alone. Keep and eye on it. It is the highest grade oil in the world.

I have lived in both Saudi Arabia and Iran. In the former, gas cost the equivalent of 4 cents per litre back in 1990.

In Iran, again gas was very low-priced. However, it was unavailable for a few days each week...lack of supply, due to a lack of oil refining capacity. I believe that situation continues, in Tehran at least.

I believe that we in "the West" are very wasteful when it comes to non-renewable resources. We fly fresh asparagus and fresh flowers up from South America. We truck lettuce and celery (98% water) from California and Florida. Get real!

Given that

A nuclear plant might not be in place until 2020

It takes 1,200 cubic feet of gas to create one barrel of bitumen.

How are the economics of tar sand extraction going be sustained in view of

1. The massive gas price increase which will be generated by the impending oil peak.


2. The cost of emissions trading of the greenhouse gases generated by the energy imput into the extraction process


3. The cost of getting alternative water sources to the Athabasca River.





Ian Lumley