Oilsands in for helluva ride

Russia’s President Vladimir Putin, Iran’s rogue regime, George W. Bush and Mexico have more impact on the price of Canadian oil stocks than does Alberta Premier Ed Stelmach, who increased royalties yesterday.

Welcome to the Brave New World where oil and gold prices trade in tandem on bad geopolitical news.

Putin’s support for Iran and Mexico’s announcement earlier this week that its wells are starting to run dry all explain why the oil royalty hike by Alberta didn’t stop most Canadian oil stocks from increasing, along with others worldwide.
Bad news and Middle East jitters drove crude to nearly US$92 a barrel, which led to higher prices for oil stocks everywhere, including two of Alberta’s biggest “victims” of higher royalties and largest players, Canadian Natural Resources and Imperial Oil.

Exceptions at the start of the day were Canadian Oil Sands Trust and Suncor, which were sideswiped by Alberta yesterday when a proposed grandfathering of their favourable royalties was removed. But they recovered their values and closed up on the day.

The province should not have done that and may incur litigation as a result.

In fact, Alberta’s actions will be another example of the new global marketplace at work. Share increases aside, the jury is out as to whether its royalty increases will take the air out of the oilsands bubble.

Financial Post (Canada)