The catastrophic BP oil spill, which occurred in early June 2010 in the Gulf of Mexico, has had a dramatic impact on the environment, on residents of the affected area, and on investors worldwide. Since the spill, Canadian oil sands companies such as Suncor Energy Inc. and Canadian Natural Resources Ltd., have boasted impressive gains in trading prices. Canadian oil stocks reached the highest premium since 2005, and have been favored features of money market funds. This article will point out how the BP oil spill is likely to benefit Canadian oil-sands companies.

Canada, also well known worldwide for gold production, will likely see a higher demand for oil extraction from its oil sands for the following reasons:

(1) The Canadian oil sands in Alberta hold the second largest oil reserves in the world behind Saudi Arabia, and thus promise to provide a continuous source of oil, well into the future.

(2) Crude oil extraction from the oil sands is a cleaner, safer, more environmentally friendly alternative to offshore drilling in places such as the Gulf of Mexico. Fewer environmental risks mean that this form of oil extraction may prove to be a more popular method in the future.

(3) Oil output from the Gulf of Mexico is projected to fall as much as 300,000 barrels per day over the next five years, according to the International Energy Agency. This means that as demand for oil continues to increase, it will be less matched by supply which, in turn, will boost prices. The world will keep turning to proven oil producers, like Canada, as a result.

(4) Developing countries from around the world have an insatiable thirst for oil as the main ingredient of economic expansion. These countries are constantly looking for a cheap, and more importantly, stable supply to encourage more growth. With oil prices on the rise (especially from the Middle East) Canada has a marked advantage.

(5) Due to a contentious political environment, especially in countries with unstable or outright hostile regimes, oil supply is more precarious than ever. Western democracies are keen to hedge their bets against producers such as Venezuela and Iran whose governments have been vocal in their opposition to the west. Dominant world supplier Saudi Arabia is an ally of the west, but the alliance is arguably unnatural (between west and east as well as between democracy and monarchy) and thus tenuous. Iran’s alleged development of nuclear weapons has many governments on edge. It will still be several decades, at least, before alternative sources of energy become a viable supplement to oil.

As the demand for more politically responsible sources of energy increases it seems certain that Canada will be one of the most sought after suppliers of oil.