How to understand the BP Oil Spill and Oil Sands

Although the BP oil spill has caused international uproar due to the financial and environmental problems it has caused, some industries have fared well from this event. Oil sands companies have enjoyed increased demand in the wake of this catastrophe, and may make for the perfect addition to your portfolio. This article will evaluate the forces driving the value of oil sands companies upward, and explain why oil sands can make for an attractive investment option.

The BP oil spill is being called an environmental and financial disaster. However, financial analysts claim that the spill is also responsible for an increased demand for oil sands companies. In the wake of the BP oil spill, many Canadian oil sands companies have displayed an impressive gain in trading prices. The prices of Canadian oil stocks are at their highest in the past five (5) years, and oil sands are now heavily featured in the portfolios of many investors. Canada is already a worldwide leader in the Gold Production industry; they now look poised to become just as well-renowned for oil production thanks to the growing value of oil sands companies.

The increasing popularity of Canadian oil sands can be attributed to various factors, notably those relating to the political, environmental, and financial worlds. The oil sands in Alberta, Canada currently boast the second largest oil reserves in the entire world, granting an extremely advantageous perch in which they can guarantee a continuous source of oil for the foreseeable future. The extraction of crude oil from oil sands is much safer, much cleaner, and much more environmentally friendly than the more widely used offshore drilling methods. In a time when environmental issues are an ever-growing concern (and with public awareness at an all-time high due to the BP oil spill), a “greener” alternative to offshore drilling is currently a highly sought-after capability. Coupled with the ever-increasing demand for crude oil– which the International Energy Agency believes offshore sites cannot sustain for much longer– Canadian Oil Sands companies have the opportunity to establish themselves as clean, yet reliable, oil producers.

There is also an increasing demand for politically responsible energy sources as well as money coming out of the sidelines and out of Money Market Funds as investors seek higher returns. Western governments are increasingly unwilling to rely on oil producers in countries which have hostile or unstable governments. While Saudi Arabia, the world’s largest oil producer, is currently a Western ally, Western democracies may feel more comfortable with a more harmonious alliance in the current global climate of political unrest. The East and West are naturally wary of each other, and Canada could use this to their advantage by offering oil production that is closer to home. Additionally, there is an increasing demand from developing countries for a cheap and stable source of oil to enable growth. With Middle Eastern oil prices on the rise, Canadian oil sands companies have an opportunity to establish themselves as a cheaper alternative.

There is a great deal of evidence in support of Canada becoming one of the world’s leading oil producers, and the BP oil spill seems to have acted as a catalyst for growth in this industry. Financial Adviser Raymond James claims that Canada is a strong all-around investment option, largely due to its stable political environment, sound banking policies, and a favorable taxation structure. When you take this into account, along with the claims that Canadian oil sands can offer a politically responsible, environmentally friendly, and sustainable energy resource, Canadian oil sands appear to be a very attractive investment option for financial investors.

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This entry was posted on Tuesday, June 14th, 2011 at 2:09 pm and is filed under General, Politics. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.