Consider that a Barrel of Oil cost roughly $10 in the late ‘90s and is now hovering around $70.

That’s a 600% increase in 5 years! That’s a MAJOR worry because the US economy is so dependant on Oil.

America is built on the Automobile. Cars burn Gas and Gas is refined Oil. So right away, rising Oil Prices increase your driving costs. In other words the extra $20 or $50 it takes to fill up your car can no longer be used to pay down your credit cards or your mortgage. Increased Oil Prices are a direct tax on your earnings.

But the effects are even more profound than that.

Oil is a part of an energy source called fossil fuels. Fossil fuels are mined from the ground and include Natural Gas and Coal. The fact is that the price of ALL fossil fuels have been rising - which is quite profound if you think about it!

* Your home uses Natural Gas for heating or air conditioning.
* A lot of power plants use Natural Gas and Coal to generate Power.
* Even fertilizer used to grow food contains fossil fuels in the form of nitrates.

In other words, a rising Oil price means almost every single thing you do or consume will go up in Price. A scary thought indeed.

So why are Oil Prices rising?

The Media will have you believe that Oil Prices are high because of the War in the Middle East. No doubt that has something to do with it. The Middle East is incredibly unstable and we rely on Saudi Arabia and friends for nearly 20% of our Oil!

Venezuela, providing us with 10% of our Oil imports, is another important source of Oil. And Chavez, the president of Venezuela is not overly friendly to the United States. Source Oil Industry statistics.

But there is another MAJOR factor.

Many leading geologists are starting to claim that the World has reached what the call Peak Oil. Peak Oil is the term used to describe the fact that Oil demand will outstrip supply and continue to do so year after year after year. In other words, we don’t have enough Oil to meet the insatiable demand (remember China and India are rapidly becoming major users of Oil) in the future. And that can only mean one thing, MUCH higher oil prices.

The great hope is a MAJOR discovery very SOON. There are potentials for a major find in northern Iraq (under difficult circumstances no doubt) or for Prudhoe Bay (Alaska) to come online in a big way or the Canadian Oil Sands to exceed expectations. However the fact is that there will probably not be enough Oil to meet demand and prices will continue moving higher.

This will have a dramatic effect on our lifestyle and the way society organizes itself. Big suburban centers (where all food and produce is trucked in) will no longer be viable!

If you thought $3 gas was bad, what do you think about $10 per Gallon? That’s where we’re heading if Oil Prices continue their relentless march upwards!

Beneath the frozen tundra of Alberta lies the Canadian oil sands the biggest known reserve of oil in the world. An estimated 1.7 to 2.5 trillion barrels of oil are trapped in a complex mixture of sand, water and clay. To put this in perspective, Saudi Arabia has “only” 261.9 billion barrels of proven reserves.
Since the Oil is frozen in the ground, extracting it is harder and more expensive than conventional methods. Production costs currently run at just over $15 per barrel. Operations are profitable if oil prices remain above $30 a barrel which seems likely in the current geopolitical climate.
The “oil sands” are heavy hydrocarbon deposits that mix bitumen, sand, water, and clay. Bitumen is a heavy, carbon-rich, hydrogen-poor hydrocarbon. The bitumen is upgraded to a cleaner, more fluid product called Syncrude Sweet Blend (SSB) by removing carbon and adding hydrogen. It is then transferred by pipeline to refineries throughout Canada and the United States.

Bitumen is upgraded into a high quality, light sweet crude oil
http://www.syncrude.ca

How to invest in Canadian Oil Sand stocks.
One way to get exposure is to invest in the major producers:

* Suncor Energy (NYSE: SU)

* Syncrude Canada Ltd. - a joint venture primarily owned by Canadian Oil Sands Limited, Imperial Oil (AMEX: IMO), and Petro-Canada (NYSE: PCZ).
* Canadian Oil Sands Trust (Toronto Stock Exchange COS.UN).

Another way is to invest in companies that operate or support strip-mining operations.

Strip-mining is the digging up of oil sands and trucking them to upgrading plants. Strip-mining employs drilling technology with steam injection to pump liquid bitumen directly out of the ground. More than half of all oil sands are currently recovered using strip-mining. A company with exposure to strip-mining is Joy Global (Nasdaq: JOYG).

Mining the Canadian Oil Sands is very energy intensive (more so than conventional oil extraction methods) and environmentally unfriendly because it results in a large increase in Carbon Dioxide emissions. One suggestion is to employ nuclear power (no emissions) to generate the energy to extract the Oil.

Regardless of hazards and complexities, the fact is, in contrast to some Middle Eastern countries Canada is politically friendly to the USA. This of itself makes investing in Canadian Oil Sands stocks a positive long-term investment.