I've had my fair share of experiences with the peculiarities surrounding Canadian oil production.
One of the most interesting took place a few years back...
It happened at the crack of dawn, less than an hour after I pulled into Fort McMurray.
Lady Luck was on my side as I convinced the clerk at the front desk of one of the few hotels in town to let me check in before 6 a.m.
I soon found myself in a standard hotel room, but with one slight exception: The place was full of plaques emblazoned in Chinese lettering ? surely a sign of things to come, with Sinopec's $4.65 billion oil sands deal coming less than a year after my visit.
That was my first run-in with the burgeoning Sino-Canadian relationship.
It wouldn't be my last.
You see, there's a new phrase being taught to Alberta's top oil execs: F?ich?ng g?nxi? n? w?i yu?ny?u.
Roughly translated, that's Chinese for "Thanks for the oil."
Our Home and Native Oil Dealer
If there's one country we take for granted, it's Canada.
This is especially true when it comes to crude.
Forget the Middle East, forget OPEC, and don't even think about Mexico...
Our neighbor to the north far and away feeds our oil addiction. This much is proven each month by the Energy Information Administration's import data.
We've watched this chart tick higher 28 of the last 32 years (click to enlarge):
Last May, we graciously accepted an average of 2.8 million barrels per day from Canada ? twice as much as we imported from Saudi Arabia, our second highest source for oil. In fact, it takes four of OPEC's largest producers to match our Canadian imports!
Uncle Sam, on the other hand, hasn't exactly returned this oil gift in kind. The multi-year feet-dragging delay for government approval of the Keystone XL Pipeline is a perfect example.
What the U.S. government doesn't realize is that the Canadian oil industry won't wait around for the green light...
Things are about to change for the country's oil exports. And soon.
Mandarin Madness
It should be obvious to anyone outside of the D.C. Beltway that if we don't want more Canadian oil?? or if we continue to spurn it?? Asia will gladly take it.
The Chinese are waiting with open arms...
In the latest Short-Term Energy Outlook by the EIA, a nugget of information was glossed over by most people who took the time to read it: For the first time ever, non-OECD (think: China, India, Russia) oil consumption will surpass that of OECD countries by next year.
It's a trend we had better get used to, as non-OECD oil demand is expected to top 45.9 million per day in 2014.
Now, I'm not suggesting that Canada will suddenly stop sending us oil. But I have a feeling they've already found a better customer.
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Earlier this week, a small press release from Canada's National Energy Board (NEB) was buried in the political drivel you and I are inundated with on a daily basis.
(Don't feel too bad if you missed it. I can count on one hand my friends who know Canada even has a National Energy Board.)
The NEB announced the environmental impact of production from the massive Canadian oil sands deposits won't play a role in the review of a new pipeline project by Kinder Morgan.
It's called the Trans Mountain pipeline system, and Kinder Morgan wants to nearly triple its capacity to almost 900,000 barrels per day.
Rather than transporting crude south, the Trans Mountain Pipeline ships it west from Alberta to British Columbia.
Think about this for a moment...
If the oil sands production weren't taken into account in TransCanada's project, approval would've been given back in 2008.
So while TransCanada's wait to ship more Canadian oil to U.S. refineries goes on endlessly, Kinder Morgan will help Canada tap into the crude-hungry Asian market.
And every barrel they send to the Far East is one less available for us.
For individual investors, the difference between the two stocks' performance has been considerable over the past year:
The major difference between TransCanada and Kinder Morgan's projects is that only one will get approval.
Unfortunately, it won't be the U.S. who will benefit from all this...
But there's absolutely no reason you shouldn't be beating the returns on both of these pipeline stocks.
My readers have been doing just that, day in and day out, for years now...
Because even with global oil demand shifting to favor those developing non-OECD countries, the most lucrative investments remain at home in the States.
This is how just one of our Bakken picks stacks up against the aforementioned pipeline companies:
Learn more about the three U.S. oil stocks we're buying now.
The good news is you won't have to brush up on your Mandarin...
Until next time,
Keith Kohl
@KeithKohl1 on Twitter
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations ? all ahead of the mainstream media. For more on Keith, go to his editor's page.
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