Customer Service 1 (888) 261-2693
Advanced Search

The Best Long-Term Oil Investment You Can Make

By Matt Badiali, editor, S&A Resource Report
Tuesday, March 27, 2007

Here's a quick question: "Who sells the U.S. more oil, Kuwait or the U.S. Virgin Islands?"
 
Yes, it's a trick question...
 
We import more than twice as much oil from the U.S. Virgin Islands than from Kuwait. In fact, I think most American's don't realize exactly where our oil imports come from:
 
Country
Imports* (Millions of Barrels)
Canada
1,851
Saudi Arabia
1,563
Mexico
1,435
Nigeria
1,106
Venezuela
955
Angola
553
Algeria
548
Iraq
514
*Year-to-date 2007, data from EIA
Now here's the important question for us as investors: Which one of these countries looks like a stable, long-term partner... and deserving of a big investment?
 
If you said none of the above, you wouldn't be far wrong in my estimation. With a few exceptions, the list reads more like a who's who of political strife, graft, and corruption than a roster of where I want to do business.
 
However, the U.S. is in a bit of a pickle when it comes to oil imports. A radical windbag leads our fifth-largest supplier, our fourth-largest supplier is on the brink of civil war, and our third-largest supplier is fading fast.
 
Thanks to a production decline in the giant Cantarell Field, Mexican production fell by half last year... and that's just the beginning. Mexico's oil fields are like a car that hasn't had an oil change in 100,000 miles. We just can't rely on them anymore.
 
While many politicians want us to believe the answer is Iraq, I'm skeptical. I'm also wary of Russian partnerships. I don't see Russia dealing fairly when it comes to oil. At least Venezuelan president Hugo Chavez comes right out and says he hates the West. The Russians use magically disappearing "environmental concerns" to blackmail concessions from international oil companies.
 
As you probably guessed, I think our long-term partner is Canada. Canada is politically stable and contains the world's second-largest oil reserves, most of them in Alberta's tar sands. These heavy-oil deposits have an extraordinarily long production life ahead of them. How many giant oil deposits can you say will last over 100 years? Well, we can confidently say that about Alberta's tar sands.
 
In the S&A Oil Report, I've recommended several companies that are related to Canadian oil and heavy-oil production... and I think you may see Big Oil looking to make acquisitions there in the near future. The long reserve life and friendly politics are simply too tempting for them to ignore.
 
If you're looking to do more research on oil-sands plays, I recommend starting with some of the biggest players: Suncor (SU), Petro-Canada (PCZ), Western Oil Sands (WTO.TO), and Canadian Oil Sands Trust (COS-UN.TO).
 
These companies, plus the refiners and pipeline businesses that help get that oil from Alberta to your fuel tank, are where investors will make safe, long-term gains in oil.
 
Good investing,
 
Matt Badiali




Recent Articles
Market Notes
Infrastructure plays at new 52-week highs: Kennametal (drill bits & cutting tools), Lafarge (cement), U.S. Steel, and Layne Christensen (water drilling).
 
Pipeline companies still soaring: Williams Partners, Energy Transfer Partners, TransMontaigne, Enbridge, Kinder Morgan, and Valero LP all hit new highs.
 
Mexican stocks surge: Grupo Radio Centro and Telefonos de Mexico both at new 52-week highs.
 
PowerShares Energy & Exploration ETF at new 52-week high.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%