Baltimore, MD--Oil prices are almost guaranteed to remain at higher levels. And the need for the U.S. to kick its Middle Eastern oil addiction is crucial. Now is the time to figure out just how we're going to satisfy our oil demand.

If the last two weeks taught us one thing, it's that oil prices are still very much unstable.

Iran drove oil prices up more than $10 a barrel at times during the recent hostage fiasco. But it seems like everyone got what they wanted in the end--England's sailors back at home and Iran's oil price leap.

Also looming in the near future is the summer driving season and a hurricane season that could be devastating.

Last time, we looked at the Government Accountability Office's (GAO) report on peak oil. More specifically, how it suggests we will increase our oil supplies. The third source for more oil it suggests is from unconventional sources--namely Canadian oil sands and the massive oil shale deposits located in Wyoming, Colorado and Utah.

Here's the kicker--these unconventional spots for oil are still relatively unknown. Canadian oil sands have been gaining attention for the last few years, but nowhere near close to full potential. And unless you're a geologist or in a small inner circle of petroleum experts, chances are you've never heard of the massive oil shale plays like the Green River Basin in Wyoming.

But the good news?

Getting into both of these is still easy to do.

It's All About the Bitumen

I know many Energy and Capital readers are well informed about Canadian oil sands. But let me catch up our newer members.

Oil sands (also known as tar sands) are neither oil nor tar. The oil is extracted from bitumen. Bitumen is a heavy, degraded form of crude oil. The problem is that it is so thick it doesn't flow like typical oil.

Oil sands are recovered in two ways. The first involves strip mining the bitumen and extracting the oil at refineries. The second technique involves an in-situ process that heats the oil. This allows it to flow into producing wells.

Canadian oil sands are ready to take off, too. The U.S. is expecting to boost oil sands imports to five million barrels of oil per day--that's a fivefold increase!

You need to realize that our rising oil demand has to be met somehow. And with oil prices sustaining themselves well over $50 a barrel, there's a huge window of opportunity for unconventional sources to be developed.

There are several ways to invest in this area. I know a lot of experts will push the major players with enormous market capitalization. Some of these companies have multibillion-dollar caps, and most are very sound investments. But the truth is that these large market caps mean it'll take a mountain of dollars to drive your share price up. You won't find shares doubling or tripling as you can with the smaller companies.

Let's take one of the smallest companies (if not the smallest) in the Alberta oil sands play, Micron Enviro Systems, Inc. (OTC: MENV). So far in 2007, this company has increased its total Alberta oil sands acreage by over 5,000%--yet the stock is still trading for pennies! Two weeks ago, Micron announced it had acquired 100% interest in four properties near one owned by Shell.

Micron is grossly undervalued at its current price, and with the right push could make explosive gains. My point is that smaller companies like Micron are out there for investors, you just have to look around.

Canadian oil sands are starting to get more attention, but if you really want to see a play with enormous potential, look no further than the oil shales in the midwest.

Shale Set to Shine

According to the GAO report, more than 1.8 trillion barrels of oil lie underneath Wyoming, Colorado and Utah. The U.S. holds about 62% of the world's oil shale resources.

The Green River Basin could eventually produce between three and five million barrels per day--for well over a hundred years.

Oil Shale consists of sedimentary rock containing bituminous materials. Extraction is similar to what is done with oil sands. The shale must be heated to a specific temperature to remove the oil.

The best part is that oil shale is still practically unknown.

As with other unconventional oil sources, many technological barriers still need to be overcome before oil shales become a reliable source of oil. Some of these obstacles include controlling groundwater and high cost of operations.

Yet there's good reason to think twice before dismissing oil shales as "never going to happen."

The Colorado Oil and Gas Conservation Commission was given $4 million in 2005-2006, according to the Colorado Department of Natural Resources. In 2007, that number has jumped to about $8 million. Around one million has been allocated for oil shale funding. Doubling the budget is a direct reflection of how much growth is expected.

Three companies currently searching for the answer to oil shale's problems are Chevron, Shell and EGL. Developing their techniques could take between five and ten years. I'll keep you updated as to how they're progressing.

Future Outlook

So long as oil continues its dramatic rise there will always be breakthroughs in unconventional oil development.

Once peak oil sinks its claws into the Middle Eastern fields, the world of oil is going to shift dramatically. These two sources--oil sands and oil shale--may be part of the solution we're looking for.

Until next time,

Keith Kohl